A monopolist will not use marginal cost pricing because at that output
A) MR is greater than MC.
B) MR is below the ATC curve.
C) MC is greater than MR.
D) MC is greater than the monopolist's price.

Question

Quizplus · Accepted Answer

A monopolist's profit-maximizing output is determined by the point where MR = MC. At this output, the monopolist's MC is not greater than the price it charges, as this would result in negative profits. However, the monopolist's MC is greater than the MR it receives at this output, because MR is less than the price due to the downward-sloping demand curve. Therefore, the monopolist will not use marginal cost pricing, as this would require setting a price equal to MC, which is below what it can charge due to its market power.

A Monopolist Will Not Use Marginal Cost Pricing Because at That