Which of the following is TRUE for monopolists?
A) They charge a price below average cost, which guarantees above normal profits.
B) Their marginal revenue increases with output.
C) They maximize profits by producing at the midpoint of their demand curve.
D) They produce all units of output for which marginal revenue is greater than or equal to marginal cost.

Question

Quizplus · Accepted Answer

Monopolists maximize profits by producing all units of output for which marginal revenue is greater than or equal to marginal cost. This is because their market power allows them to charge a higher price and reduce output compared to perfect competition, which results in a lower marginal revenue but also lower marginal cost. Therefore, they produce a lower quantity of output than what would be produced under perfect competition in order to charge a higher price and maximize their profits. Choices A, B, and C are incorrect statements about monopolists.

Which of the Following Is TRUE for Monopolists