A monopoly will set price:

(a) at the highest price along its demand curve.

(b) equal to the value at which marginal cost intersects the demand curve.

(c) so that it can sell the quantity at which marginal revenue is equal to marginal cost.

(d) so that it can sell the quantity at which marginal revenue is equal to zero, which results in revenue maximization.

The correct answer is (c) so that it can sell the quantity at which marginal revenue is equal to marginal cost.

Monopolistic firms will set the price at the level in which marginal revenue equals marginal cost. That is to say, firms that participate in a monopoly follow the same profit-maximizing rule (MR=MC) as perfectly competitive markets and monopolistic competitive markets. At this point, the price will be still above the average total cost, which allows monopolists to earn positive economic profits. Therefore, in a monopoly, the optimal price is achieved when marginal cost equals marginal revenue.

In contrast, setting the price at the highest point of the demand curve would be inefficient. If the marginal revenue intersects the demand curve the firm would earn less profit. Additionally, setting the price at which marginal revenue equals zero might lead to negative economic profits because the average total cost would be higher.