Which of the following is true under monopoly?
A) P ATC
B) P MC
C) P = MR
D) P = ATC

Question

Which of the following is true under monopoly?
A) P > ATC
B) P > MC
C) P = MR
D) P = ATC

Quizplus · Accepted Answer

Under monopoly, the demand curve is downward sloping, which means that in order to maximize profits, the monopolist must produce where marginal revenue (MR) is equal to marginal cost (MC). However, since the monopolist has market power, they are able to charge a price that is greater than their marginal cost. Therefore, choice B, where P > MC, is true under monopoly. Choices A and D are not necessarily true because the monopolist could still be producing at a level where price equals average total cost (ATC) or where price is greater than ATC but less than MC. Choice C is only true at the profit-maximizing output level and is not necessarily true overall.

Which of the Following Is True Under Monopoly