A monopolist sets both price and quantity simultaneously, and the amount of output that it supplies depends
A) only on the marginal cost curve.
B) only on the demand curve.
C) on both its marginal cost curve and the demand curve that it faces.
D) on both its average cost curve and the demand curve that it faces.

Question

Quizplus · Accepted Answer

A monopolist determines the quantity of output to produce and the price at which to sell that output by considering both its marginal cost curve and the demand curve it faces. The intersection of the marginal cost curve and the marginal revenue curve (which is derived from the demand curve) determines the profit-maximizing level of output. The price is then set based on the demand curve at that level of output.

A Monopolist Sets Both Price and Quantity Simultaneously, and the Amount