324PART FIVEFIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRYA similar argument applies at high levels of output, such as Q2. In this case,marginal cost is greater than marginal revenue. If the firm reduced production by1 unit, the costs saved would exceed the revenue lost. Thus, if marginal cost isgreater than marginal revenue, the firm can raise profit by reducing production.In the end, the firm adjusts its level of production until the quantity reachesQMAX, at which marginal revenue equals marginal cost. Thus, the monopolist’s profit-maximizing quantity of output is determined by the intersection of the marginal-revenuecurve and the marginal-cost curve.In Figure 15-4, this intersection occurs at point A.You might recall from Chapter 14 that competitive firms also choose the quan-tity of output at which marginal revenue equals marginal cost. In following thisrule for profit maximization, competitive firms and monopolies are alike. But there
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