A monopolist maximizes profits at the output at which
A)total revenue is at its greatest, assuming that the firm has both fixed and variable costs.
B)price equals marginal cost.
C)price exceeds marginal cost by the greatest amount.
D)marginal revenue equals marginal cost.

Question

Quizplus · Accepted Answer

A monopolist maximizes profits where marginal revenue (MR) equals marginal cost (MC). This is because the monopolist can influence the price of its product and therefore the demand, which means that the price is not necessarily equal to marginal cost. However, the level of output at which MR=MC gives the highest possible profit for the monopolist. Choosing any other output level would result in either lower profits or losses.

A Monopolist Maximizes Profits at the Output at Which