A profit-maximizing monopolist will receive zero profits when
A) the average total cost curve lies above the demand curve for all possible rates of output.
B) the average total cost curve is tangent to the demand curve at the profit maximizing price.
C) marginal revenue, marginal cost, and average total cost are all equal.
D) a second firm enters the industry.

Question

Quizplus · Accepted Answer

A profit-maximizing monopolist will receive zero profits when the average total cost curve is tangent to the demand curve at the profit-maximizing price. This means that at the quantity where marginal revenue equals marginal cost, the price is equal to the average total cost, resulting in zero economic profit.

A Profit-Maximizing Monopolist Will Receive Zero Profits When