A monopoly firm selling air conditioners to consumers in a small town is currently maximizing profits by charging a price of $230 per air conditioner. It follows that the marginal cost of each air conditioner is:
A) less than $230.
B) more than $230.
C) equal to $230.
D) none of the above.

Question

Quizplus · Accepted Answer

In a monopoly, profit maximization occurs where marginal cost (MC) equals marginal revenue (MR), not necessarily the price. Since the firm is maximizing profits, the price ($230) is greater than the marginal cost.

A Monopoly Firm Selling Air Conditioners to Consumers in a Small