At a given output level, a monopolist earns a profit only if:
A)the slope of the total revenue curve exceeds the slope of the total cost curve.
B)the height of the marginal revenue curve at the output produced exceeds the height of the marginal cost curve at that output.
C)the height of the demand curve at the output produced exceeds the height of the marginal revenue curve at that output.
D)the height of the demand curve at the output produced exceeds the height of the average total cost curve at that output.
E)the height of the marginal cost curve at the output level is equal to the height of the average total cost curve at that output.

Question

Quizplus · Accepted Answer

A monopolist earns a profit when the price (which is determined by the demand curve at the output produced) is higher than the average total cost at that output. This is because profit is calculated as (Price - Average Total Cost) * Quantity, and for profit to be positive, price must exceed average total cost.

At a Given Output Level, a Monopolist Earns a Profit