If a monopoly charges a price equal to its marginal cost, then it must be the case that the firm has
A)maximized profits.
B)suffered a loss.
C)made a profit that is less than the maximum level.
D)suffered a loss that is less than the minimum level.
E)made a profit or suffered a loss, depending on the cost structure.

Question

Quizplus · Accepted Answer

In a monopoly, charging a price equal to marginal cost does not guarantee maximum profits, as monopolies typically maximize profits by setting prices above marginal cost. The actual financial outcome (profit or loss) depends on the firm's cost structure relative to the price.

If a Monopoly Charges a Price Equal to Its Marginal