Which of the following is true under monopoly?
A) Profits are always positive.
B) P MC.
C) P = MR.
D) All of the choices are true for monopoly.

Question

Which of the following is true under monopoly?
A) Profits are always positive.
B) P > MC.
C) P = MR.
D) All of the choices are true for monopoly.

Quizplus · Accepted Answer

Under monopoly, profits are not always positive as it depends on the level of costs and demand. However, the monopoly firm always maximizes its profits at the level of output where marginal revenue (MR) equals marginal cost (MC). Since the monopolist has market power, it can set the price (P) above its marginal cost. Therefore, P > MC is true under monopoly. While P = MR is also true for monopoly, it should be noted that this condition only holds at the profit-maximizing level of output.

Which of the Following Is True Under Monopoly