Profit maximizing monopolists set their prices:
A)by finding MR = MC.
B)as low as possible.
C)as high as possible.
D)at a convenient level.

Question

Quizplus · Accepted Answer

Profit maximizing monopolists set their prices by finding the point where marginal revenue (MR) equals marginal cost (MC). This is because at this point, the monopolist is producing the level of output that generates the maximum profit. Setting prices as low as possible or at a convenient level would not necessarily yield the highest profit. Setting prices as high as possible could potentially lead to higher profits, but only if the resulting decrease in quantity demanded does not offset the gains from the higher price. Therefore, the best choice is A, as it is the only option that relates to the profit maximizing behavior of monopolists.

Profit Maximizing Monopolists Set Their Prices