Suppose that the Jay Cap Company is a profit-maximizing firm with a monopoly in the production of baseball caps.The firm sells its baseball caps for $25 each.From this information,we can assume that the Jay Cap Company is producing a level of output at which:
A) marginal revenue equals $25.
B) marginal cost is less than $25.
C) average total cost equals $25.
D) average total cost is greater than $25.

Question

Quizplus · Accepted Answer

In a monopoly, the firm maximizes profit where marginal cost (MC) equals marginal revenue (MR). Since the firm sells caps for $25, the price is higher than the marginal cost at the profit-maximizing output level.

Suppose That the Jay Cap Company Is a Profit-Maximizing Firm