A profit-maximising monopolist chooses the output level where marginal revenue equals marginal cost and chooses the corresponding price off the market demand curve.

Question

Quizplus · Accepted Answer

This statement accurately describes the profit-maximizing behavior of a monopolist. By choosing the output level where marginal revenue (the additional revenue from selling one more unit) equals marginal cost (the additional cost of producing one more unit), the monopolist ensures that they are producing the optimal quantity of output to maximize profits. The monopolist then sets the corresponding price based on the market demand curve, which reflects consumers' willingness to pay for the product at various quantities.

A Profit-Maximising Monopolist Chooses the Output Level Where Marginal Revenue