To maximize profit, the monopolist sets:

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A monopolist's profit is maximized where marginal revenue equals marginal cost. This is because maximizing profit means setting the price at a level where the marginal revenue gained from each additional unit sold is equal to the marginal cost of producing that unit. If marginal revenue is greater than marginal cost, the firm can increase profits by producing more. If marginal cost is greater than marginal revenue, the firm can increase profits by producing less. Therefore, for a monopolist to maximize profit, it must set marginal revenue equal to marginal cost. A monopolist maximizes profit where marginal revenue (MR) equals marginal cost (MC). This is because the monopolist can increase profit by reducing output and charging a higher price, but this also reduces revenue. Therefore, the monopolist will continue to reduce output and charge a higher price until MR=MC. This choice allows the monopolist to set the optimal price and quantity to maximize profits.

To Maximize Profit, the Monopolist Sets