Asked by Ashley Eggleston on May 17, 2024
Verified
When looking at a monopolist's level of output,you can expect to find
A) average revenue greater than price.
B) price greater than marginal cost.
C) marginal cost greater than marginal revenue.
D) marginal revenue greater than price.
Marginal Cost
The cost of producing one additional unit of a product or service, crucial for economic decision-making and pricing strategies.
Marginal Revenue
Additional earnings received from marketing one more unit of a good or service.
- Comprehend the principle of marginal revenue in monopoly situations and its effect on determining prices and production levels.
Verified Answer
KE
Kimberly EspinozaMay 23, 2024
Final Answer :
B
Explanation :
A monopolist maximizes profit where marginal revenue (MR) equals marginal cost (MC). However, since a monopolist has market power, the price they charge will be greater than MC. Therefore, B is the correct answer. A is incorrect because in a monopolist, average revenue (AR) equals price (P) since they are the only seller in the market, and AR=P. C is incorrect because in order to maximize profit, MR must be greater than MC, not the other way around. D is incorrect because a monopolist's MR curve is downward sloping, meaning that MRP.
Learning Objectives
- Comprehend the principle of marginal revenue in monopoly situations and its effect on determining prices and production levels.
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