If a monopolist's marginal cost is zero,in order to maximize profit the monopolist will:
A)set a price where demand is unit elastic.
B)produce where demand is elastic.
C)expand output to the limit of its physical capacity.
D)not impose an efficiency loss on the society,since P=MC.

Question

Quizplus · Accepted Answer

When marginal cost (MC) is zero, a profit-maximizing monopolist will set a price where demand is unit elastic because this is the point where total revenue is maximized. At unit elasticity, the percentage change in quantity demanded equals the percentage change in price, meaning any deviation from this point would lead to a decrease in total revenue.

If a Monopolist's Marginal Cost Is Zero,in Order to Maximize