A monopolist maximizes its profit by producing the amount of output where
A) total revenue equals total cost.
B) marginal revenue equals marginal cost.
C) marginal revenue equals zero.
D) price equals marginal cost.

Question

Quizplus · Accepted Answer

A monopolist will maximize profit by producing the quantity of output where marginal revenue (MR) equals marginal cost (MC). This is because at that level of output, the marginal cost of production is equal to the marginal revenue from each additional unit sold. If the monopolist were to produce at a lower level of output, then they could increase their profit by producing more and selling at a higher price. If they were to produce at a higher level of output, then their marginal cost would exceed their marginal revenue, leading to a decrease in profit. Therefore, the best choice is B where the output is at the point where MR = MC.

A Monopolist Maximizes Its Profit by Producing the Amount of Output