Which of the following statements is correct for a monopolist? (i)
The firm maximizes profits by equating marginal revenue with marginal cost.
(ii)
The firm maximizes profits by equating price with marginal cost.
(iii)
Demand equals marginal revenue.(iv)
Average revenue equals price.
A)(i), (iii), and (iv) only
B)(i) and (iv) only
C)(i), (ii), and (iv) only
D)(i), (ii), (iii), and (iv)

Question

Quizplus · Accepted Answer

A monopolist maximizes profits by producing where marginal revenue is equal to marginal cost (i), but it does not necessarily equate price with marginal cost (ii). Demand does not necessarily equal marginal revenue for a monopolist, as they have the ability to set the price above marginal revenue (iii). However, average revenue does equal price for a monopolist, as they are the sole seller in the market (iv). Therefore, the correct statement for a monopolist is (i) and (iv) only.

Which of the Following Statements Is Correct for a Monopolist