Which of the following is true for a monopolist?
A) It is a price taker.
B) Profit is maximized where marginal cost equals marginal revenue.
C) The firm faces a horizontal or flat demand curve.
D) It will earn zero economic profit in the long run.

Question

Quizplus · Accepted Answer

A monopolist is a price maker, not a price taker, and has the power to set its own price. To maximize profit, a monopolist will produce where marginal cost equals marginal revenue, which is not necessarily where price equals marginal cost. The demand curve facing a monopolist is downward sloping, not horizontal or flat. A monopolist may earn positive economic profit in the long run, as there are barriers to entry that prevent other firms from entering the market and competing away profits.

Which of the Following Is True for a Monopolist