How is a monopolist's profit-maximizing quantity of output determined
A)by the intersection of the marginal-revenue curve and the marginal-cost curve
B)by the intersection of the marginal-revenue curve and the average-total-cost curve
C)by the intersection of the average revenue curve and the marginal-cost curve
D)by the intersection of the demand curve and the average-total-cost curve

Question

Quizplus · Accepted Answer

A monopolist's profit-maximizing quantity of output is determined by producing at the quantity where marginal revenue (MR) equals marginal cost (MC). This is because a monopolist has market power and can set its price higher than its marginal cost, which means it will only produce more as long as the additional revenue generated from selling one more unit (MR) is greater than the additional cost of producing that one more unit (MC). The intersection of the MR and MC curves provides the monopolist with the output level that maximizes its profit.

How Is a Monopolist's Profit-Maximizing Quantity of Output Determined