question archive If a monopoly is maximizing profits, then A
If a monopoly is maximizing profits, then A
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If a monopoly is maximizing profits, then
A. price will always equal marginal cost.
B. price will always be greater than marginal cost.
C. price will always equal marginal revenue.
D. price will always be greater than the elasticity of demand.
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If a monopoly is maximizing profits, then
B. the price will always be greater than the marginal cost.
In order to maximize profits, the monopolist produces the quantity at which marginal cost is equal to the marginal revenues and charges a corresponding price to this quantity at the average revenue curve. Since the average revenue curve lies above the intersection of the marginal cost curve and the marginal revenue curve, the price will always be higher than the marginal cost.
