Which statement is true?
A)The monopolist produces at an output level that is less than peak efficiency.
B)The monopolist can sell more output only by raising price.
C)The monopolist's demand and marginal revenue curves are identical.
D)Price is read off the marginal revenue curve.

Question

Quizplus · Accepted Answer

A monopolist has market power and can choose to produce at a level where marginal revenue equals marginal cost, which is less than the output level at peak efficiency (where price equals marginal cost). This is because the monopolist can charge a price above marginal cost and earn higher profits. Therefore, statement A is true. Statement B is incorrect because the monopolist may be able to sell more output at a lower price if there is any consumer surplus in the market. Statement C is incorrect because the monopolist's marginal revenue curve is below its demand curve due to the downward sloping demand curve. Statement D is incorrect because price is read off the demand curve, not the marginal revenue curve.

Which Statement Is True