Suppose the accompanying table describes the demand for a good produced by monopolist. $$\begin{array} { | c | c | }
\hline \text { Price } & \text { Quantity } \
\hline \$ 10 & 1 \
\hline \$ 9 & 2 \
\hline \$ 8 & 3 \
\hline \$ 7 & 4 \
\hline \$ 6 & 5 \
\hline \$ 5 & 6 \
\hline \$ 4 & 7 \
\hline
\end{array}$$
Based on the data in the table, we know the firm should:
A)be able earn an economic profit.
B)produce more than 7 units.
C)not produce the seventh unit.
D)not produce the fifth unit.

Question

Suppose the accompanying table describes the demand for a good produced by monopolist. $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity  } \
\hline \$ 10 & 1 \
\hline \$ 9 & 2 \
\hline \$ 8 & 3 \
\hline \$ 7 & 4 \
\hline \$ 6 & 5 \
\hline \$ 5 & 6 \
\hline \$ 4 & 7 \
\hline
\end{array}$$  
Based on the data in the table, we know the firm should: 
A)be able earn an economic profit.
B)produce more than 7 units.
C)not produce the seventh unit.
D)not produce the fifth unit.

Quizplus · Accepted Answer

To determine the optimal production quantity for the monopolist, we need to consider marginal revenue (MR) and marginal cost (MC). Without explicit costs provided, we assume MC is constant and less than the price of the seventh unit. The MR for each additional unit decreases as quantity increases due to the downward-sloping demand curve. Producing the seventh unit would add more to cost than to revenue, suggesting the firm should not produce the seventh unit to maximize profit.

Suppose the Accompanying Table Describes the Demand for a Good