A pure monopolist will realize an economic profit if price exceeds Average Total Cost (ATC) at the profit-maximizing/loss-minimizing level of output. This is because the monopolist has the ability to control the price of its product due to the absence of close substitutes, and can set the price at a level where it can cover all costs and make a profit. If price is below ATC, the monopolist will incur losses.

Solved

A Pure Monopolist

Question 46

Multiple Choice

A pure monopolist

A) will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.
B) will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output.
C) will realize an economic loss if MC intersects the downsloping portion of MR.
D) always realizes an economic profit.

Correct Answer: