Which of the following statements is correct for a monopolist?
i.The firm maximizes profits by equating marginal revenue with marginal cost.
ii.The firm maximizes profits by equating price with marginal cost.
iii.Demand equals marginal revenue.
iv.Average revenue equals price.
A)i),iii),and iv)only
B)i)and iv)only
C)i),ii),and iv)only
D)i),ii),iii),and iv)

Question

Quizplus · Accepted Answer

In a monopoly market, the firm faces a downward-sloping demand curve, which means the marginal revenue is less than the price. Therefore, the firm maximizes profits by producing at the level where marginal revenue equals marginal cost, not by equating price with marginal cost. The statements in options (i), (iii), and (iv) are correct, but statement (ii) is incorrect for a monopolist. So, option B is the correct choice.

Which of the Following Statements Is Correct for a Monopolist