Which of the following is true of the monopolist?Question 16Select one:a.Profit is maximized at the level of input where marginal value product equals marginal factor cost. Price charged to the producer is determined from the supply curve.b.Profit is maximized at the level of output where marginal revenue equals marginal cost. Price charged to the consumer is determined from the demand curve.c.Profit is maximized at the level of output where marginal revenue equals marginal cost. Price charged to the consumer is determined from the average total cost curve.d.Profit is maximized at the level of input where marginal value product equals marginal factor cost. Price charged to the producer is determined by the government.e.Profit is maximized at the level of output where marginal revenue equals marginal physical product. Price charged to the consumer equals marginal revenue at that level of output.
Question
Which of the following is true of the monopolist?Question 16Select one:a.Profit is maximized at the level of input where marginal value product equals marginal factor cost. Price charged to the producer is determined from the supply curve.b.Profit is maximized at the level of output where marginal revenue equals marginal cost. Price charged to the consumer is determined from the demand curve.c.Profit is maximized at the level of output where marginal revenue equals marginal cost. Price charged to the consumer is determined from the average total cost curve.d.Profit is maximized at the level of input where marginal value product equals marginal factor cost. Price charged to the producer is determined by the government.e.Profit is maximized at the level of output where marginal revenue equals marginal physical product. Price charged to the consumer equals marginal revenue at that level of output.
Solution
The correct answer is b. Profit is maximized at the level of output where marginal revenue equals marginal cost. Price charged to the consumer is determined from the demand curve.
Here's why:
A monopolist is a single seller in a market. They have the power to control the price and quantity of the goods or services they provide.
The goal of a monopolist, like any firm, is to maximize profit. This is achieved when the marginal cost (MC) of producing an additional unit of output equals the marginal revenue (MR) gained from selling that unit. This is because, at this point, the cost of producing an additional unit of output equals the revenue gained from selling that unit, so any additional units would cost more to produce than they would bring in revenue.
The price charged to consumers in a monopoly is determined by the demand curve. This is because the monopolist is the only seller in the market, so they can set the price at the level where they can sell the quantity of goods that maximizes their profit. This price is typically higher than in a competitive market, where price equals marginal cost.
So, the statement "Profit is maximized at the level of output where marginal revenue equals marginal cost. Price charged to the consumer is determined from the demand curve." accurately describes the behavior of a monopolist.
Similar Questions
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