An unregulated monopolist uses the marginal revenue equals marginal cost (MR = MC) rule to determine the
Blank
______.

Question

An unregulated monopolist uses the marginal revenue equals marginal cost (MR = MC) rule to determine the 
Blank
______.

BlackTom AI · Accepted Answer

The prompt asks about what a monopolist uses the MR = MC rule to determine.
Option 1: 'optimal amount to spend on labor costs' — This is a production cost decision, not the output choice. MR = MC governs the profit-maximizing quantity, not expenditures on inputs like labor.
Option 2: 'profit-maximizing output only' — While MR = MC pinpoints the profit-maximizing quantity, it does not specify the price. In monopoly, price is determined by the demand schedule at that quantity, so focusing on output alone is incomplete.
Option 3: 'profit-maximizing output and price' — This aligns with how a monopolist behaves: MR = MC determines the optimal quantity, and the price is then read off the demand curve at that quantity, yielding both output and price.
Option 4: 'profit-maximizing price only' — Price is not chosen directly by MR = MC; instead, the quantity is chosen first, and the price follows from the market demand. Therefore, this option is misleading.
Thus, the reasoning under MR = MC in a monopolistic setting leads to selecting the option that recognizes both the output level and the price determined from the demand curve.

An unregulated monopolist uses the marginal revenue equals marginal cost (MR = MC) rule to determine the Blank ______.

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