Suppose the DeBeers company exercises monopoly power in the distribution of diamonds. This year, the company earns economic profits and maximizes profit. This implies that the price of diamonds per carat will

a. be equal to the marginal cost of diamonds.

b. be equal to the average cost of diamonds.

c. exceed the marginal cost of diamonds, but be equal to the average cost of diamonds.

d. exceed both the marginal cost and average cost of diamonds.

Suppose the DeBeers company exercises monopoly power in the distribution of diamonds. This year, the company earns economic profits and maximizes profit. This implies that the price of diamonds per carat will d. exceed both the marginal cost and average cost of diamonds.

The demand curve that a monopoly firm faces is the same as the demand curve for the entire industry because the monopoly is the only firm. That means the curve is downward sloping as indicated by the law of demand. The monopolist can choose to operate at any point along the curve. That means they can choose their price or their level of output. They will choose the point that maximizes their revenue, which will be above both marginal and average costs.