For a profit-maximizing monopoly, the price charged to consumers is:

• A. greater than marginal cost
• B. equal to marginal cost
• C. equal to average variable cost
• D. less than marginal cost

Answer: (A)

Verified step by step guidance

1. Recall that a profit-maximizing monopoly sets output where marginal revenue (MR) equals marginal cost (MC), i.e., \(\text{MR} = \text{MC}\).
2. Understand that the demand curve faced by a monopoly is downward sloping, so the price (P) is determined from the demand curve at the chosen quantity, and marginal revenue is less than price (\(\text{MR} < \text{P}\)).
3. Since \(\text{MR} = \text{MC}\) and \(\text{MR} < \text{P}\), it follows that \(\text{P} > \text{MC}\) for a monopoly.
4. Contrast this with perfect competition, where price equals marginal cost (\(\text{P} = \text{MC}\)), highlighting the monopoly's ability to charge a price above marginal cost.
5. Therefore, the price charged by a profit-maximizing monopoly is greater than marginal cost.