Which of the following is true of the profit earned by a monopolist? Select one: a. Normal profit is ensured where price is equal toaverage total cost. b. Normal profit is ensured where marginal costexceeds average revenue. c. Profit is maximized along the inelastic portion of the demand curve. d. Economic profit is made where average variable costequals marginal revenue.<\/p>\n\n\n\n
The correct answer and explanation is:<\/strong><\/mark><\/p>\n\n\n\n The correct answer is: In the context of a monopolist’s profit<\/strong>, understanding the relationship between price, costs, and revenues is key.<\/p>\n\n\n\n A monopolist ensures normal profit<\/strong> when the price equals average total cost (ATC)<\/strong>. This condition means the monopolist is covering all costs, including opportunity costs, but is not necessarily making an economic profit. Profit maximization occurs at MR = MC and on the elastic portion of the demand curve, making option a<\/strong> the correct and most accurate choice.<\/p>\n","protected":false},"excerpt":{"rendered":" Which of the following is true of the profit earned by a monopolist? Select one: a. Normal profit is ensured where price is equal toaverage total cost. b. Normal profit is ensured where marginal costexceeds average revenue. c. Profit is maximized along the inelastic portion of the demand curve. d. Economic profit is made where […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-21235","post","type-post","status-publish","format-standard","hentry","category-quiz-questions"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/21235","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=21235"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/21235\/revisions"}],"predecessor-version":[{"id":21236,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/21235\/revisions\/21236"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=21235"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=21235"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=21235"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
a. Normal profit is ensured where price is equal to average total cost.<\/strong><\/p>\n\n\n\n
\n\n\n\nExplanation:<\/h3>\n\n\n\n
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Marginal cost (MC) exceeding average revenue (AR) does not ensure normal profit. In fact, if MC > AR, the firm is producing units that cost more than the revenue they generate, which lowers profit.<\/li>\n\n\n\n
Profit maximization for a monopolist occurs where marginal revenue (MR) equals marginal cost (MC), and this is always on the elastic<\/strong> portion of the demand curve, never the inelastic portion. This is because in the inelastic range, lowering output raises total revenue but increases total cost disproportionately, reducing profit.<\/li>\n\n\n\n
Economic profit depends on the relation of price and average total cost, not just average variable cost (AVC) and MR. AVC is part of total cost but does not include fixed costs, so equality of AVC and MR does not guarantee profit.<\/li>\n<\/ul>\n\n\n\n
\n\n\n\nSummary:<\/h3>\n\n\n\n