A monopolist will not be able to receive a positive economic profit at any price-output combination at which
A) marginal cost is less than average total cost when the monopolist has equated marginal revenue and marginal cost.
B) the average total cost curve is everywhere above the demand curve.
C) marginal cost is less than average variable cost when the monopolist has equated marginal revenue and marginal cost.
D) marginal revenue falls at a faster rate than marginal cost increases.

Question

Quizplus · Accepted Answer

When the average total cost curve is everywhere above the demand curve, the monopolist is unable to charge a price that covers both its costs and earns a profit. Therefore, the monopolist will not be able to receive a positive economic profit at any price-output combination. Choices A, C, and D do not necessarily guarantee that the monopolist cannot earn a positive economic profit.

A Monopolist Will Not Be Able to Receive a Positive