Posted: September 16th, 2017

Why does a price-setting firm always set its profit-maximizing price above the price that maximizes its revenue?

Please answer the following question considering the below directions: Why does a price-setting firm always set its profit-maximizing price above the price that maximizes its revenue?
a) First, illustrate the revenue-maximizing rule and profit maximizing rule with appropriate diagrams. (use just D, MC, and MR curves)
b) Then, explain your answer referring to the diagrams in section a) in less than 80 words.