Which of the following statements about monopolists is most likely correct? A. Without government intervention, monopolists will always earn profits. B. A monopolist maximizes price where marginal revenue equals marginal cost. C. If a monopolist increases the product price, total revenue will increase more than total costs. D. Monopolists have imperfect information about demand. Answer: D I was contemplating between B and D. Reason for B being “monopolist maximize PROFIT where MR =MC”.
Yeah, but profit is not price. Where MC = MR is max profit Max price would some output less than this, which would not be the profit maximizing quantity.
A monopolist always wants to maximize PROFIT, not price.
profit is max when diffrence between TR and TC is max If monopoly charge max price then demand falls and profit would reduce.
But it was a tempting, easy-to-make mistake…
The actual demand curve is always higher than the MR curve for monopolists. So while they will always produce the quantity where MC=MR, they set the price higher since the actual demand curve intersection point is higher than the MR=MC. Thats why B is definitely wrong. They maximize at a higher point than that. D makes the most sense since monopolists are price searchers meaning they cant just always use the MC=MR for price setting like in perfect comp. Since MR is not = to the demand curve their information is imperfect. You could also think that the lack of competition means they dont have any other metrics by which to measure themselves against.
Bump I was debating between C & D, but I remembered D from my last econ revision.