The profit-maximizing quantity for a monopolist is found where marginal revenue equals marginal cost

Marketing Jan 09, 2021

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.

Expert Solution

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.

Archived Solution

Unlocked Solution

You have full access to this solution. To save a copy with all formatting and attachments, use the button below.

Already a member? Sign In

Important Note: This solution is from our archive and has been purchased by others. Submitting it as-is may trigger plagiarism detection. Use it for reference only.

For ready-to-submit work, please order a fresh solution below.

Or get 100% fresh solution

Get Custom Quote