CFA Practice Question

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CFA Practice Question

If a firm has a monopoly over the sale of photographic paper and seeks to maximize profits, it will set the price of the product ______.

A. equal to the marginal cost of production
B. equal to the average total cost of production
C. so that its marginal revenue equals its marginal cost
Correct Answer: C

Unless this is true, the monopolist will be able to increase profits by either increasing or decreasing price.

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