In the absence of price regulation,a monopolist:
A) charges a price below MR.
B) charges a price above MC.
C) charges a price equal to MR.
D) charges a price above MC and equal to MR.

Question

Quizplus · Accepted Answer

In the absence of price regulation, a monopolist has the ability to charge a price higher than marginal cost (MC) in order to maximize profits. This is because they have market power and can control the quantity supplied. However, charging a price above MR would result in a reduced demand for the good, so they aim to set a price where MR equals MC, in order to maximize profits while selling the most possible at that price. This means that choice D is incorrect. The monopolist does not charge a price below MR either, as this would not be the optimal point of profit maximization. Therefore, the correct answer is B - the monopolist charges a price above MC.

In the Absence of Price Regulation,a Monopolist