Which of the following statements best describes a monopoly?
A) Price exceeds marginal cost.
B) Average revenue equals marginal revenue.
C) Output is greater than the socially efficient level.
D) Average revenue is equal to average cost.

Question

Quizplus · Accepted Answer

A monopoly is a market structure in which there is only one seller of a good or service, and there are no close substitutes available to consumers. The monopolist has the power to set the price of the good or service, and they will typically choose a price that exceeds marginal cost in order to maximize their profits. Therefore, option A is the correct description of a monopoly. Option B is incorrect because average revenue will always exceed marginal revenue for a monopolist. Option C is not always true, as a monopolist may produce less than the socially efficient level depending on their cost structure. Option D is also incorrect because a monopolist will set their price above marginal cost, so average revenue will be greater than average cost.

Which of the Following Statements Best Describes a Monopoly