Which statement is true for a profit maximizing monopolist?
A)It always faces a downward sloping demand curve.
B)It can avoid diminishing returns to production.
C)It will not produce where marginal cost equals marginal revenue.
D)It can charge whatever price it wants.

Question

Quizplus · Accepted Answer

A profit maximizing monopolist always faces a downward sloping demand curve because it is the sole producer in the market and has the ability to control the price by adjusting the quantity it produces. Diminishing returns to production are a concept related to the short-run production function and do not directly impact a monopolist's ability to maximize profits. A monopolist will produce where marginal cost equals marginal revenue because this is the point of profit maximization. While a monopolist has some degree of pricing power, it cannot charge whatever price it wants without considering the demand for its product.

Which Statement Is True for a Profit Maximizing Monopolist