A monopolist under marginal cost pricing has an incentive to
A)inflate costs.
B)produce more than the efficient quantity of output.
C)produce less than the efficient quantity of output.
D)maximize consumer surplus.
E)produce the efficient quantity of output.

Question

Quizplus · Accepted Answer

Under marginal cost pricing, a monopolist sets the price equal to the marginal cost of production. At this price, the monopolist produces the efficient quantity of output, which is the quantity that maximizes total welfare (consumer surplus plus producer surplus).

A Monopolist Under Marginal Cost Pricing Has an Incentive to