Which of the following is true for a monopoly?
A) The intersection of total revenue and total cost establishes the profit-maximizing rate of output.
B) The demand curve indicates the highest price consumers are willing to pay for the rate of output.
C) Several different prices are compatible with the profit-maximizing rate of output.
D) The total revenue curve indicates the highest price consumers are willing to pay for the rate of output.

Question

Quizplus · Accepted Answer

In a monopoly market, the demand curve represents the highest price that consumers are willing to pay for a given rate of output. The monopoly will use this information to determine the profit-maximizing price and output level. The intersection of marginal revenue and marginal cost will give the profit-maximizing output level, not the intersection of total revenue and total cost. Only one price is compatible with the profit-maximizing rate of output in a monopoly market, not several different prices like in a perfectly competitive market. The total revenue curve indicates the total amount of revenue generated by the monopoly at different output levels, not the highest price consumers are willing to pay.

Which of the Following Is True for a Monopoly