The monopolist will choose the price and output combination at which
A) MC equals AR.
B) MC equals MR.
C) MC equals price.
D) MR equals AR.

Question

Quizplus · Accepted Answer

The monopolist will choose the price and output combination at which MC equals MR. This is because MR represents the change in total revenue resulting from a one-unit increase in output, and the monopolist's goal is to maximize total revenue. At the point where MC equals MR, the monopolist is producing the optimal amount of output where the additional cost of producing one more unit (MC) is exactly equal to the additional revenue gained from selling one more unit (MR). Therefore, the monopolist will choose this output level and set the corresponding price based on market demand.

The Monopolist Will Choose the Price and Output Combination at Which