What would be the profit-maximizing price for the firm to charge?

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Expert Solution

ANSWER- profit maximising price refers to a level at which total profit of a firm is maximum. In other words it is the point where marginal revenue equals to marginal costs.

In the monopoly form of market firms get supernormal profit. Firms produces larger quantity and still make normal profit. When firms have to maximise profit, they starts selling same quantity at higher price than perfect competition market.

In the competitive form of market there are large number of seller. The firm is a price taker. producers have no control over the market price. Every firm gains maximum profit only for shorter period. Buyers and sellers are aware of prices at a point of time. Thus, firms in this market gains maximum profit in the situation of marginal revenue being equals to marginal costs.

following is the graphical representation of profit maximisation by firms.

Rahul Sunny answered 1 year ago

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