The monopolist faces a downward sloping demand curve, and maximizing profits requires the monopolist to
A) accept the market price for its product.
B) will produce where the demand curve is inelastic.
C) search for the price consistent with producing to the point at which marginal revenue equals marginal cost.
D) search for the highest possible price consistent with maximizing its revenues, irrespective of its explicit and implicit opportunity costs.

Question

Quizplus · Accepted Answer

The monopolist should search for the price consistent with producing to the point at which marginal revenue equals marginal cost, as this is the point at which profits are maximized. Simply accepting the market price (A) may not result in the highest profits, and producing where the demand curve is inelastic (B) may result in lower profits. Searching for the highest possible price (D) may not take into account explicit and implicit opportunity costs, and may not result in the highest profits.

The Monopolist Faces a Downward Sloping Demand Curve, and Maximizing