The price chosen by a monopolist ________.
A) maximizes social surplus
B) maximizes consumer surplus
C) is dependent on the production of other firms
D) is independent of the production of other firms

Question

Quizplus · Accepted Answer

A monopolist has no competition in the market to consider while setting the price, so the price it chooses is independent of the production of other firms. The monopolist's profit-maximizing price is determined by the intersection of its marginal revenue and marginal cost curve, which results in a higher price and lower output level than in a competitive market. Neither consumer nor social surplus is maximized in this scenario.

The Price Chosen by a Monopolist ________