For a profit-maximizing monopoly that charges the same price to all consumers, what is the relationship between price P, marginal revenue MR, and marginal cost MC?

a. P = MR and MR = MC
b. P > MR and MR = MC
c. P = MR and MR > MC
d. P > MR and MR > MC

(b.) P > MR and MR = MC

The monopolist, being the sole seller in the market, has the power to decide the price and output of the good. The monopolist likes to produce at the profit-maximizing level, which happens at the point where the marginal revenue is equal to marginal cost of production. However, because the demand curve and the marginal revenue curve faced by a monopolist are downward sloping, the AR (or the demand curve) is placed at a higher level than the MR curve. This makes the price in the monopoly greater than the marginal cost and marginal revenue. The price is determined at the corresponding level of MR = MC in the AR curve.