A monopolist will operate in the short run if which of the following is above average variable cost?
A) Marginal cost.
B) Marginal revenue.
C) Price.
D) Average total cost.

Question

Quizplus · Accepted Answer

A monopolist will continue to operate as long as its price is above its average variable cost in the short run, since it can cover its variable costs and contribute to fixed costs and profits. Marginal cost and marginal revenue may influence the profit-maximizing output level but do not determine whether the monopolist will shut down or continue operating. Average total cost is relevant for long-run decisions, but not for short-run shutdown decisions.

A Monopolist Will Operate in the Short Run If Which