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Homework answers / question archive / The profit-maximizing quantity for a monopolist is found where marginal revenue equals marginal cost
The profit-maximizing quantity for a monopolist is found where marginal revenue equals marginal cost. How does the monopolist find the profit-maximizing price?
a. It is equal to the height of the supply curve at the profit-maximizing quantity.
b. It is equal to the height of the demand curve at the profit-maximizing quantity.
c. It is equal to the marginal revenue at the profit-maximizing quantity.
d. It is equal to the marginal cost at the profit-maximizing quantity.
The correct option is:
b. It is equal to the height of the demand curve at the profit-maximizing quantity.
The monopolist chooses to produce at a quantity where its marginal revenues and marginal cost are equated. It then charges the corresponding price for this quantity on the demand curve or the average revenue curve.
