A monopoly will price its product:
A) where total revenue is maximized.
B) where total costs are minimized.
C) at that point on the market demand curve corresponding to an output level in which marginal revenue equals marginal cost.
D) at that point on the market demand curve which intersects the marginal cost curve.

Question

Quizplus · Accepted Answer

A monopoly will price its product at the point on the market demand curve corresponding to an output level in which marginal revenue equals marginal cost. This is because a monopoly has the power to control the quantity of output supplied, and therefore the price at which it can sell its product. In order to maximize profits, the monopoly will produce up to the point at which the marginal revenue from selling an additional unit of output is equal to the marginal cost of producing it. At this point, the monopoly will be producing the optimal level of output and charging the corresponding price.

A Monopoly Will Price Its Product