For a monopoly,
A)price and output are closely-linked choices
B)marginal revenue always exceeds marginal cost
C)price always exceeds average total cost in the short run
D)price is set independently from the output decision
E)price is always the highest that the market will bear

Question

Quizplus · Accepted Answer

In a monopolistic market, the price and output decisions are interdependent, as the monopolist has the power to set the price of the product and subsequently determine the output level that maximizes profits. Therefore, the choice of price and output level is closely linked. Marginal revenue may not always exceed marginal cost in the short run, and the price may not always be the highest that the market will bear. Moreover, the price may or may not exceed the average total cost in the short run, depending on the market conditions and the pricing strategy of the monopolist. However, the interdependence of price and output level is a characteristic feature of a monopolistic market.

For a Monopoly