A monopoly will maximize profits by producing an output at which
A)MR D.
B)ATC = MR.
C)MC = P.
D)MC = MR.
E)TC = TR.

Question

A monopoly will maximize profits by producing an output at which
A)MR > D.
B)ATC = MR.
C)MC = P.
D)MC = MR.
E)TC = TR.

Quizplus · Accepted Answer

A monopoly will maximize profits by producing where marginal revenue (MR) equals marginal cost (MC), as long as this occurs at a price that is higher than the monopoly's average variable cost (AVC). This is because operating at a price lower than AVC would mean that the monopoly is losing money, while operating at a price equal to or lower than average total cost (ATC) would mean the monopoly is earning a smaller profit than it could be earning at the output level where MC=MR. Therefore, the correct choice is D, where MC=MR.

A Monopoly Will Maximize Profits by Producing an Output at Which