A monopolist: Maximizes profit at the output where price equals marginal cost. Charges a higher price...

A monopolist:

		Maximizes profit at the output where price equals marginal cost.
		Charges a higher price than a competitive firm, ceteris paribus.
		Is a price taker since it has market power.
		Cannot earn an economic profit in the long run.

Solutions

Expert Solution

A monopolist maximizes profit when it produce that level of output corresponding to which marginal revenue equals marginal cost.

As monopolist can sell more only by reducing price, its marginal revenue curve is downward sloping and is under its demand curve unlike the competitive firm whose MR curve is horizontal straight line and coincides with its demand curve.

Due to this price corresponding to profit-maximizing level of output for monopoly is higher than that for the perfectly competitive firm.

Thus,

A monopolist charges a higher price than a competitive firm, ceteris paribus.

Hence, the correct answer is the option (2).

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist...

A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. true or false Price discrimination is a rational strategy for a profit-maximizing monopolist when there is no opportunity for customers to engage in arbitrage across market segmentations true or false When regulating a monopoly with average cost pricing, the monopoly is able to enjoy a zero economic profit and the deadweight loss of...

1.A monopolist maximizes profit at the output rate where its total revenue equals total cost. True...

1.A monopolist maximizes profit at the output rate where its total revenue equals total cost. True False 2. To maximize profit, the perfectly competitive firm charges a price equal to __________ while the monopolist charges a price __________. marginal revenue; equal to marginal cost marginal cost; greater than marginal cost marginal revenue; less than marginal revenue average total cost; greater than average total cost 3.Compared to the perfectly competitive firm, the monopolist faces a demand curve that is ___________________ elastic...

Question 37 A monopolist maximizes profits by a. producing an output level where marginal revenue equals...

Question 37 A monopolist maximizes profits by a. producing an output level where marginal revenue equals marginal cost. b. charging a price equal to marginal revenue and marginal cost. c. charging a price where marginal cost equals average total cost. d. Both a and b are correct. Question 38 A monopoly is an inefficient way to produce a product because a. it faces a downward-sloping demand curve. b. it can earn both short-run and long-run profits. c. the cost to...

A monopolist with a constant marginal cost of production of 10 maximizes its profit by choosing...

A monopolist with a constant marginal cost of production of 10 maximizes its profit by choosing to produce where the price elasticity of demand is –3. (Recall that MR = p(1 + 1/ε) where MR is marginal revenue, p is price and ε is the point price elasticity of demand.) A. If price is decreased (from its profit maximizing level) by a small amount, revenue of the monopolist will increase. B. If the monopolist’s fixed cost increases, its profit maximizing...

A profit-maximizing monopolist charges a price of $36. The intersection of the marginal revenue and marginal...

A profit-maximizing monopolist charges a price of $36. The intersection of the marginal revenue and marginal cost curves occurs where output is 20,000 units and marginal cost is $24. Average total cost for 20,000 units of output is $32. As a result, the monopolist’s profit is more than $80,000. true or false The continuous downward slope of the average total cost curve suggests that the profit-maximizing natural monopolist is able to exploit economies of scale to keep competitors from successfully...

For a monopolist: Price is greater than marginal revenue. Marginal revenue equals zero. Marginal cost equals...

For a monopolist: Price is greater than marginal revenue. Marginal revenue equals zero. Marginal cost equals zero. Average total cost equals marginal cost.

1..A pure monopolist will maximize profits by producing at that output where price and marginal cost...

1..A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal. A)True B)False 2..In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to: A)average total cost. B)marginal revenue. C)average variable cost. D)average cost. 3..Which is not true for a monopolistically competitive industry? A).Firms tend to operate with excess capacity. B). Each firm faces a downward-sloping demand curve. C). These firms earn zero...

why is the level of output at which marginal revenue equals marginal cost the profit maximizing...

why is the level of output at which marginal revenue equals marginal cost the profit maximizing output?

Why is the level of output at which marginal revenue equals marginal cost the profit maximizing...

Why is the level of output at which marginal revenue equals marginal cost the profit maximizing output?

QUESTION 8 For a monopolist: price equals average total cost. price is above marginal revenue. marginal...

QUESTION 8 For a monopolist: price equals average total cost. price is above marginal revenue. marginal revenue equals zero. marginal cost equals zero. QUESTION 9 An example of price discrimination is the price charged for: an economics textbook sold at a campus bookstore. gasoline. theater tickets that offer lower prices for seniors. a postage stamp. QUESTION 10 There is only one gas station within hundreds of miles. The owner finds that if she charges $3 a gallon, she sells 199...

Subjects