in test of non competitive markets of your course i am not able to get that why the answer of mcq ques no 6 is option a . i think you have made a mistake and if is not please explain the whole answer me again because i am not able to get that
Hi Vani,
Let me explain you the reason why option (a) is the correct answer. Look, we know that the equilibrium condition of a monopolist is where MR equals MC. Graphically, this is denoted by the point of intersection, where MC intersects MC. In the concerned figure, this point has been denoted by E. Now, drag your mouse vertically upwards. I mean point your mouse on E and from there raise it vertically until you reach point K. Now, this vertical distance as covered by your mouse is the difference between AR and MR. Since AR lies above MR, so we can say that AR exceeds MR or AR > MR.
So, now you can observe that at the equilibrium point E, where MC = MR yet MR < AR. Thus, this is what the option (a) implies by the given inequality as MC = MR < AR.
Hope, it will clarify your doubt. If not, feel free to let us know.
Keep posting
...cya!!
Let me explain you the reason why option (a) is the correct answer. Look, we know that the equilibrium condition of a monopolist is where MR equals MC. Graphically, this is denoted by the point of intersection, where MC intersects MC. In the concerned figure, this point has been denoted by E. Now, drag your mouse vertically upwards. I mean point your mouse on E and from there raise it vertically until you reach point K. Now, this vertical distance as covered by your mouse is the difference between AR and MR. Since AR lies above MR, so we can say that AR exceeds MR or AR > MR.
So, now you can observe that at the equilibrium point E, where MC = MR yet MR < AR. Thus, this is what the option (a) implies by the given inequality as MC = MR < AR.
Hope, it will clarify your doubt. If not, feel free to let us know.
Keep posting
...cya!!