Which of the following conditions generally holds when a monopoly firm is producing its profit-maximizing level of output? A)Marginal cost [MC] = marginal revenue [MR] = average cost [AC] = average revenue [AR] B)MC = MR AC C)MC = MR = price D)MC = MR

Question

Which of the following conditions generally holds when a monopoly firm is producing its profit-maximizing level of output?
A)Marginal cost [MC] = marginal revenue [MR] = average cost [AC] = average revenue [AR]
B)MC = MR > AC
C)MC = MR = price
D)MC = MR < AR

Quizplus · Accepted Answer

In a monopoly, the profit-maximizing condition is where marginal cost (MC) equals marginal revenue (MR). However, because the monopolist can set prices above marginal cost, the price (or average revenue, AR) is greater than MR.

Which of the Following Conditions Generally Holds When a Monopoly