The profit maximizing quantity for a monopoly is where
A)marginal revenue is 0
B)marginal revenue=marginal cost
C)marginal cost=demand
D)consumer surplus is minimized

Question

Quizplus · Accepted Answer

A monopoly should produce where marginal revenue (MR) equals marginal cost (MC) in order to maximize profits. This is because at any other output level, either MR<MC or MR>MC, which means the monopolist could increase profits by adjusting production to the MR=MC level. At the MR=MC output level, the monopolist charges a price that is higher than its marginal cost, implying that the monopolist is capturing some consumer surplus, but not all of it. Thus, the correct answer is B, where marginal revenue is equal to marginal cost.

The Profit Maximizing Quantity for a Monopoly Is Where