A profit maximizing monopolist sets output where
A)MC = MR.
B)MC = P.
C)MC = demand.
D)it depends on the average costs in each case.

Question

Quizplus · Accepted Answer

To maximize profits, a monopolist should produce where marginal cost (MC) equals marginal revenue (MR). This is the point where the additional revenue generated by producing one more unit is equal to the additional cost of producing that unit. Therefore, the correct choice is A) MC = MR. Choices B) and C) are incorrect because setting marginal cost equal to price or demand is not sufficient for profit maximization. Choice D) is incorrect because the monopolist does not base output decisions on average costs but on marginal costs and revenues.

A Profit Maximizing Monopolist Sets Output Where