A monopolist determines the profit-maximizing output
A) at the point at which TR = TC.
B) at the point at which MR = MC.
C) at any point it wants because it is the only producer of the product.
D) at the point at which TR is maximum.

Question

Quizplus · Accepted Answer

A monopolist will determine the profit-maximizing output where marginal revenue (MR) equals marginal cost (MC), as this is the point at which an additional unit of output will bring in the same amount of revenue as it costs to produce. This will result in the highest level of profit for the monopolist. Option A is incorrect because total revenue (TR) equaling total cost (TC) does not necessarily result in maximum profit for the firm. Option C is incorrect because although a monopolist has market power, it is still bound by the laws of economics and will always maximize profit at the MR=MC point. Option D is also incorrect because maximum TR does not necessarily result in maximum profit.

A Monopolist Determines the Profit-Maximizing Output