If a monopoly is maximizing profits:
A)price will always be greater than average cost.
B)price will always equal marginal cost.
C)price will always be greater than marginal cost.
D)price will always equal marginal revenue.

Question

Quizplus · Accepted Answer

A monopoly will always want to charge a price that is higher than their marginal cost in order to maximize their profits. This is because their marginal revenue (the additional revenue earned from selling one more unit) is always less than their price due to the decrease in demand caused by the higher price. Therefore, for profit maximization, a monopoly will always charge a price that is greater than their marginal cost, but not necessarily equal to their marginal revenue.

If a Monopoly Is Maximizing Profits