A profit-maximizing output for a single-price monopoly is determined by the intersection of the ________ curves and the profit-maximizing price is found on the ________ curve.
A) marginal cost and marginal revenue; marginal revenue
B) marginal cost and marginal revenue; demand
C) total revenue and total cost; total revenue
D) marginal cost and average total cost; demand
E) demand and supply; supply

Question

Quizplus · Accepted Answer

A monopoly firm will always maximize profits where marginal cost equals marginal revenue. The marginal cost curve intersects with the marginal revenue curve to determine the profit-maximizing output level. However, the price charged for this output level will be determined by the demand curve, as a monopoly has market power to set prices above marginal cost. Thus, the profit-maximizing price is found on the demand curve.

A Profit-Maximizing Output for a Single-Price Monopoly Is Determined by the Intersection