At a given output level, when can a monopolist earn a profit?
A) only if the height of the marginal revenue curve at the output produced exceeds the height of the marginal cost curve at that output
B) only if the height of the demand curve at the output produced exceeds the height of the marginal revenue curve at that output
C) only if the height of the demand curve at the output produced exceeds the height of the average total cost curve at that output
D) only if the slope of the total revenue curve exceeds the slope of the total cost curve

Question

Quizplus · Accepted Answer

The monopolist can earn a profit only if the price charged is greater than the average total cost of production. In other words, the monopolist must produce at a quantity where the price equals the marginal cost, which is also equivalent to the intersection of the marginal revenue curve and the marginal cost curve. However, this quantity may result in a loss if the average total cost exceeds the price. Therefore, for the monopolist to earn a profit, the height of the demand curve at the output produced must exceed the height of the average total cost curve at that output.

At a Given Output Level, When Can a Monopolist Earn