Asked by Nuwan Maddumage Don on Jun 29, 2024
Verified
Under which of the following conditions would a profit-maximizing monopolist necessarily raise price?
A) if product demand was price-elastic
B) if marginal revenue is positive
C) if marginal revenue was greater than marginal cost
D) if marginal cost was greater than marginal revenue
Profit-Maximizing Monopolist
A monopolist's strategy of setting a price and production level where marginal cost equals marginal revenue to achieve the highest possible profit.
Price-Elastic
A characteristic of goods or services for which demand significantly changes with small changes in price.
Marginal Revenue
The revenue increase from the sale of an additional unit of a good or service.
- Understand how monopolists determine their profit-maximizing output and pricing strategies.
Verified Answer
PS
Patrycja SzymikJul 04, 2024
Final Answer :
D
Explanation :
A profit-maximizing monopolist would raise the price when marginal cost is greater than marginal revenue. This is because, in such a scenario, reducing output would increase profits as the cost of producing an additional unit exceeds the revenue it generates.
Learning Objectives
- Understand how monopolists determine their profit-maximizing output and pricing strategies.