Suppose the accompanying table describes the relationship between price and quantity demanded for a monopolist.
$$\begin{array} { | c | c | }
\hline \text { Quntity } & \text { Price } \
\hline 1 & \$ 10 \
\hline 2 & \$ 9 \
\hline 3 & \$ 8 \
\hline 4 & \$ 7 \
\hline 5 & \$ 6 \
\hline 6 & \$ 5 \
\hline 7 & \$ 4 \
\hline 8 & \$ 3 \
\hline
\end{array}$$ If the marginal cost of producing each unit of output is $5, then at the monopolist's profit-maximizing level of output, the monopolist produces ________ units of output than is socially optimal.
A)3 fewer
B)3 more
C)2 fewer
D)1 more

Question

Suppose the accompanying table describes the relationship between price and quantity demanded for a monopolist.  
$$\begin{array} { | c | c | } 
\hline \text { Quntity } & \text { Price } \
\hline 1 & \$ 10 \
\hline 2 & \$ 9 \
\hline 3 & \$ 8 \
\hline 4 & \$ 7 \
\hline 5 & \$ 6 \
\hline 6 & \$ 5 \
\hline 7 & \$ 4 \
\hline 8 & \$ 3 \
\hline
\end{array}$$ If the marginal cost of producing each unit of output is $5, then at the monopolist's profit-maximizing level of output, the monopolist produces ________ units of output than is socially optimal.
A)3 fewer
B)3 more
C)2 fewer
D)1 more

Quizplus · Accepted Answer

The monopolist's profit-maximizing level of output is where marginal revenue equals marginal cost. In this case, marginal cost is $5, so the monopolist will produce 4 units of output. The socially optimal level of output is where price equals marginal cost, which is also 4 units of output. Therefore, the monopolist produces the same amount of output as is socially optimal.

Suppose the Accompanying Table Describes the Relationship Between Price and Quantity