If a monopolist is attempting to maximize profit , which of the following should he attempt to do?

Answer Details

A monopolist is a sole supplier of a particular good or service with no close substitutes, and therefore, has the power to influence market prices. To maximize profit, the monopolist should attempt to equate marginal cost to marginal revenue. Marginal cost refers to the cost of producing one additional unit of output, while marginal revenue is the revenue generated by selling one additional unit of output. At the point where marginal cost equals marginal revenue, the monopolist is producing the optimal level of output that maximizes profit. If marginal revenue is greater than marginal cost, the monopolist can increase profit by producing more output. On the other hand, if marginal cost is greater than marginal revenue, the monopolist can increase profit by reducing output. Equating average cost to average revenue or fixing price and output may not result in maximizing profit, as it does not consider the marginal costs and revenues associated with each unit of output. Equating price to total cost is not a viable strategy as it would lead to losses.