question archive A monopoly firm selling textbooks to students in a small town is currently maximizing profits by charging a price of $50 per book
A monopoly firm selling textbooks to students in a small town is currently maximizing profits by charging a price of $50 per book
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A monopoly firm selling textbooks to students in a small town is currently maximizing profits by charging a price of $50 per book.
It follows that the marginal cost of textbooks is:
A. equal to $50.
B. less than $50.
C. greater than $50.
D. greater than the average total cost.
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The correct answer is B. less than $50.
- This is because monopolies can maximize their profits without producing up until the point where their marginal cost equals their marginal revenue. In fact, monopolies have more pricing power than competitive firms and thus the marginal cost is less than the selling price.
