A monopolist achieves the most profitable rate of output by applying which of the following rules?
A) Average variable cost equals price.
B) Average total cost equals price.
C) Marginal revenue equals marginal cost.
D) Average total cost and average variable cost are both at a minimum.

Question

Quizplus · Accepted Answer

A monopolist achieves the most profitable rate of output where Marginal revenue equals marginal cost (MR=MC). This is because at this point, the additional revenue generated from producing one more unit of output just equals the additional cost of producing that unit, which maximizes profit. Equating average variable cost or average total cost to price may not necessarily result in profit maximization, and minimizing both average total cost and average variable cost may result in producing at a lower output level than the profit maximizing quantity. Therefore, Choice C is the best option.

A Monopolist Achieves the Most Profitable Rate of Output by Applying