In the long-run, profit maximizing monopolists
A)Price where MC and price are equal
B)Never make positive economic profits
C)Produce where average total costs are minimized
D)Will produce with the same size operation as a perfectly competitive firm would use in the long run

Question

Quizplus · Accepted Answer

In the long run, a profit maximizing monopolist will produce where MR=MC to maximize profits. However, the monopolist does not necessarily produce where price equals MC. Instead, it will produce at a quantity where the highest possible price can be charged, which exceeds MC. Therefore, the monopolist will not produce where average total costs are minimized. Also, a monopolist can make positive economic profits in the long run. However, the monopolist will produce with a smaller size of operation compared to what a perfectly competitive firm would use in the long run. This is because the monopolist restricts output to maintain a higher price and maximize profits. A perfectly competitive firm, on the other hand, would produce at the minimum point of the long run average total cost curve, which would require a larger size of operation.

In the Long-Run, Profit Maximizing Monopolists