A manager of a monopoly firm notices that the firm is producing output at a rate at which average total cost is falling but is not at its minimum feasible point. The manager argues that surely the firm must not be maximizing its economic profits. The manager's argument is
Part 2
A.
correct, since a monopolist maximizes profit at a point where average total cost should be at its lowest level.
B.
incorrect, since at the minimum feasible point of the average total cost curve, a monopolist earns zero profit.
C.
incorrect, since profit maximization requires that marginal revenue equals marginal cost but does not require the average total cost to be at any particular level.
D.
correct, since a monopolist maximizes profit at a point where average total cost is equal to marginal cost.