The question asks what is true when a monopoly is maximizing profits. The options relate price to elasticity of demand, marginal cost, and marginal revenue.

1. Problem Description

The question asks what is true when a monopoly is maximizing profits. The options relate price to elasticity of demand, marginal cost, and marginal revenue.

2. Solution Steps

To maximize profits, a firm (including a monopoly) will produce where marginal revenue (MR) equals marginal cost (MC):

$MR = MC$

In a perfectly competitive market, price equals marginal revenue ($P=MR$). However, a monopoly faces a downward-sloping demand curve, which means it must lower its price to sell more units. As a result, marginal revenue is less than price ($MR<P$).

Therefore, when a monopoly maximizes profits, we have $MR=MC$ and $MR<P$. Combining these, we get:

$MC=MR<P$

This implies that $P>MC$.

Also, a monopolist will always operate on the elastic portion of the demand curve.

3. Final Answer

b. price will always be greater than marginal cost.