When a monopolist is producing at the profit-maximizing output level, what can we conclude about the value to consumers of one additional unit of output?
A) The value will exceed the price of the additional unit.
B) The values will equal the monopolist's marginal cost.
C) The value will be less than the monopolist's marginal cost.
D) The value will exceed the monopolist's marginal cost.

Question

Quizplus · Accepted Answer

At the profit-maximizing output level, a monopolist sets output where marginal revenue equals marginal cost. However, the price charged to consumers is above this marginal cost, meaning the value to consumers of one additional unit (their willingness to pay) exceeds the marginal cost of producing it.

When a Monopolist Is Producing at the Profit-Maximizing Output Level