-Which of the following is true for a profit maximizing monopolist?
A) Marginal cost is always less than average total cost.
B) In the long run, the firm's economic profit equals zero.
C) In the short run, the firm will shut down if its marginal cost is less than its average variable cost.
D) In the short run, the firm can make an economic profit even if its marginal cost is less than its average variable cost.

Question

-Which of the following is true for a profit maximizing monopolist?
A) Marginal cost is always less than average total cost. 
B) In the long run, the firm's economic profit equals zero. 
C) In the short run, the firm will shut down if its marginal cost is less than its average variable cost. 
D) In the short run, the firm can make an economic profit even if its marginal cost is less than its average variable cost.

Quizplus · Accepted Answer

In the short run, a profit-maximizing monopolist will produce where marginal revenue equals marginal cost, even if marginal cost is less than average variable cost. This is because the monopolist can still make a profit by covering its fixed costs.

-Which of the Following Is True for a Profit Maximizing