The Rossett Ruby Company has a monopoly on the supply of rubies. At its current level of output, the marginal revenue of producing rubies is $1,000 per carat. If the firm maximizes profit, it will set the price of rubies at

a. $1,000 per carat.

b. more than $1,000 per carat.

c. a level that equals the minimum possible average cost of producing rubies.

d. less than $1,000 per carat.

The correct answer is b. more than $1,000 per carat.

This is because the monopolist trade in the market to earn the highest profit as possible. If the selling price is set equal to the purchasing price, it would lead to zero profit to the monopolist and results in no economic action further. To earn some profit, the trader requires keeping the selling price higher than the additional cost. Meanwhile, the additional earnings from selling a unit should be equal to additional cost in monopoly market. So, the marginal revenue should be lower than the selling price.