Which of the following is true for a monopoly?
A) A monopoly always makes a positive profit.
B) A price ceiling on a monopoly is always desirable.
C) Price does not equal marginal cost.
D) A price ceiling on a monopoly is always desirable and price does not equal marginal cost.

Question

Quizplus · Accepted Answer

In a monopoly, the firm has market power and can set a price higher than the marginal cost to maximize profit. This means that in a monopoly, price does not equal marginal cost. (Option A is not necessarily true, as a monopoly may incur losses in the short-run. Option B is not always desirable, as a price ceiling may lead to shortages and reduce incentives for the firm to invest in research and development. Option D is a combination of incorrect statements.)

Which of the Following Is True for a Monopoly