Question

For the following statements, decide whether it is true or false. When a monopoly is maximizing its profits, price is greater than marginal cost.

Answer 1

In a monopoly, price is not greater than marginal cost when profits are maximized.

Step-by-step explanation:

When a monopoly is maximizing its profits, the price is not greater than the marginal cost. In fact, a monopoly maximizes its profits by setting the price where marginal revenue equals marginal cost. This is because in a monopoly market, the firm has the power to control both the price and quantity of the goods it sells.

By setting the price at the point where marginal revenue equals marginal cost, the monopoly ensures that it is producing and selling the optimal quantity of goods that maximizes its overall profit.

Therefore, the statement that when a monopoly is maximizing its profits, the price is greater than marginal cost is false.