A profit-maximizing monopolist produces an output level at which
A)marginal revenue is the greatest distance from marginal cost
B)price is less than marginal cost
C)the value to society of the last unit produced equals marginal cost
D)marginal revenue equals marginal cost
E)consumers wish to purchase less than what is produced because of high monopoly prices

Question

Quizplus · Accepted Answer

A profit-maximizing monopolist produces at the output level where its marginal revenue equals its marginal cost, because this is where the additional revenue from producing one more unit of output is exactly equal to the additional cost of producing that unit. At any other output level, the marginal revenue would either be greater or lesser than the marginal cost, which would not result in maximizing profits.

A Profit-Maximizing Monopolist Produces an Output Level at Which