A monopolist sets its price:
A) Below the demand curve.
B) Without constraints since there is no competition.
C) At the rate of output where marginal revenue equals marginal cost.
D) At the minimum of the long-run average total cost curve.

Question

Quizplus · Accepted Answer

A monopolist maximizes its profits by setting its price such that its marginal revenue (MR) equals marginal cost (MC). Setting the price above this point would result in a lower quantity demanded and a decrease in revenue. Setting the price below this point would mean that the firm is not maximizing its profits. As a result, choice C is the best answer.

A Monopolist Sets Its Price