Exhibit 9-4 Demand and cost curves for a monopolist

-Although a monopoly can charge any price it wishes, it chooses:
A) the highest price.
B) price equal to marginal cost.
C) the price that maximizes profit.
D) competitive prices.
E) a fair price.

Question

Exhibit 9-4 Demand and cost curves for a monopolist
​ 
-Although a monopoly can charge any price it wishes, it chooses:
A) the highest price. 
B) price equal to marginal cost. 
C) the price that maximizes profit. 
D) competitive prices. 
E) a fair price.

Quizplus · Accepted Answer

A monopolist operates to maximize profit, so it will choose the price that maximizes profit. This is shown where marginal revenue equals marginal cost on the graph. Choosing the highest price or a fair price may not be the most profitable option, and choosing a price equal to marginal cost would result in zero profit for the monopolist. Competitive prices are not relevant for a monopolist, as they do not face competition.

Exhibit 9-4 Demand and Cost Curves for a Monopolist