A profit-maximizing monopolist produces the rate of output where
A)MR = MC and determines price based on the demand curve.
B)Price = MC.
C)MR = MC and can set price at any amount it chooses.
D)MR = MC and determines price based on ATC.

Question

Quizplus · Accepted Answer

A profit-maximizing monopolist produces where marginal revenue (MR) equals marginal cost (MC), but it determines the price based on the demand curve. This is because the monopolist has market power and can charge a higher price than the marginal cost, unlike a perfectly competitive firm that faces a horizontal demand curve and has to charge the market price. Therefore, the monopolist will produce at the quantity where MR=MC, but set the price that customers are willing to pay for that quantity based on the demand curve.

A Profit-Maximizing Monopolist Produces the Rate of Output Where