A monopoly firm selling textbooks is currently maximizing profits by charging a price of $100 per book

Marketing Dec 29, 2020

A monopoly firm selling textbooks is currently maximizing profits by charging a price of $100 per book. It follows that the marginal cost of textbooks

a. is equal to $100.

b. is less than $100.

c. is greater than $100.

d. equals the average revenue from textbooks.

Expert Solution

The correct answer is b. is less than $100,

This is because the super-normal profits are earned in the monopoly market. This is due to a lesser count of sellers offering the products to the buyers. A monopolist seller discriminates the consumer by charging the maximum market price which is depending on the paying capacity of the consumer. It results in the selling price of each unit exceeding per unit cost. In other words, the additional payment made by the monopolist is lesser as compared to per unit revenue to earn the super normal profits.

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