A profit-maximizing monopoly firm:
A) charges a price equal to marginal revenue.
B) charges a price equal to marginal cost.
C) charges a price equal to one-half marginal cost.
D) none of the above is true.

Question

Quizplus · Accepted Answer

A profit-maximizing monopoly firm does not charge a price equal to marginal revenue, marginal cost, or one-half marginal cost. Instead, it sets its output where marginal revenue equals marginal cost and then charges the highest price consumers are willing to pay for that quantity, which is above marginal cost.

A Profit-Maximizing Monopoly Firm