A profit-maximizing monopolist will produce at the point where:
A) total revenue = total costs.
B) marginal revenue = marginal cost.
C) average revenue = average cost.
D) the difference between average revenue and average cost is maximized.

Question

Quizplus · Accepted Answer

A profit-maximizing monopolist will produce at the point where marginal revenue equals marginal cost. This is because producing one more unit will increase revenue by the amount of marginal revenue but also increase costs by the amount of marginal cost. Therefore, the monopolist will only produce up until the point where the marginal revenue from producing an additional unit is equal to the marginal cost of that unit, in order to maximize profits.

A Profit-Maximizing Monopolist Will Produce at the Point Where