Question

Which of the following statements regarding a monopolist’s profit maximizing condition is false?

A) The monopolist’s profit-maximizing price will be greater than marginal cost for the last unit supplied.

B) A monopolist can earn positive economic profit.

C)Because monopoly price is above marginal cost and a monopoly earns positive economic profit, there are no benefits to consumers in the monopoly market.

D)Price equals average revenue at the profit-maximizing quantity of output.

Answer 1

C)Because monopoly price is above marginal cost and a monopoly earns positive economic profit, there are no benefits to consumers in the monopoly market.

Explanation :

Monopoly maximises it's profit where MR equals MC and charge price on the demand curve above where MR equals MC. So price >MR=MC.

Monopolist profit is determined by the price and ATC. So we can not say that, if price is above MC firm will earn positive economic profit. If price is above ATC, it will earn positive economic profit.

Price =AR

Because, total revenue =Price *quantity

So, price =total revenue /quantity

And AR =Total revenue /quantity.