A monopoly firm selling moustache wax to vain men in a small town is currently maximizing profits by charging a price of $5.It follows that the marginal cost of moustache wax
A)is greater than $5.
B)is equal to $5.
C)is less than $5.
D)None of these choices are true.

Question

Quizplus · Accepted Answer

In order for the monopoly firm to maximize profits, it sets its price where marginal revenue equals marginal cost. Since the firm is currently maximizing profits at a price of $5, it must be the case that the marginal cost of producing each unit of moustache wax is less than $5. Therefore, choice C is the correct answer.

A Monopoly Firm Selling Moustache Wax to Vain Men in a Small