Part 1What is the relationship between price, marginal revenue, and marginal cost when a single-price monopoly is maximizing profit? Part 1When a monopoly produces the profit-maximizing quantity, _______. A. marginal revenue, marginal cost, and price are all equal B. price is greater than marginal revenue, which is greater than marginal cost C. marginal revenue equals marginal cost, and price is greater than marginal revenue. D. marginal cost is minimized, and marginal revenue equals price

Question

Part 1What is the relationship between​ price, marginal​ revenue, and marginal cost when a​ single-price monopoly is maximizing​ profit? Part 1When a monopoly produces the​ profit-maximizing quantity,​ _______. A. marginal​ revenue, marginal​ cost, and price are all equal B. price is greater than marginal​ revenue, which is greater than marginal cost C. marginal revenue equals marginal​ cost, and price is greater than marginal revenue. D. marginal cost is​ minimized, and marginal revenue equals price

BlackTom AI · Accepted Answer

Let's break down the question step by step and examine what happens in a single-price monopoly at the profit-maximizing quantity.
Option A: 'marginal revenue, marginal cost, and price are all equal' — This would imply P = MR = MC. That situation occurs under perfect competition in the short run, not for a single-price monopoly. In a monopoly, the firm faces a downward-sloping demand curve, so MR lies below price, and typically MR ≠ MC except at the optimum. Therefore A is incorrect.
Option B: 'price is greater than marginal revenue, which is greater than marginal cost' — This asserts P > MR > MC. While it is true that P > MR for a monopolist (since MR < P due to the downward-sloping demand), the claim MR > MC is not generally correct at the profit-maximizing quantity. The profit-maximizing condition is MR = MC, so B misstates the relationship between MR and MC. Therefore B is incorrect.
Option C: 'marginal revenue equals marginal cost, and price is greater than marginal revenue.' — This aligns with the standard monopoly condition for profit maximization: set MR = MC, and because the demand curve is downward-sloping, price exceeds MR (P > MR). So C matches the correct theoretical result. Therefore C is correct.
Option D: 'marginal cost is minimized, and marginal revenue equals price' — This would imply MC is minimized at the chosen output and MR = P, which is characteristic of perfect competition where P = MR and firms produce where MC is minimized in the long run. In a monopoly, MR does not equal price, and profit-maximizing output does not occur at the point where MC is globally minimized. Therefore D is incorrect.
In summary, analyzing the relationships among price, marginal revenue, and marginal cost shows that only option C faithfully describes the monopoly's profit-maximizing condition: MR = MC and P > MR, while the other options misstate key relationships.

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