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Figure: The Profit-Maximizing Output and Price
-(Figure: The Profit-Maximizing Output and Price)Use Figure: The Profit-Maximizing Output and Price.Assume that there are no fixed costs and AC = MC = $200.The profit-maximizing price for a monopolist is:
A)$800.
B)$200.
C)$600.
D)$1,000.

Question

Use the following to answer question:
Figure: The Profit-Maximizing Output and Price 
-(Figure: The Profit-Maximizing Output and Price)Use Figure: The Profit-Maximizing Output and Price.Assume that there are no fixed costs and AC = MC = $200.The profit-maximizing price for a monopolist is:
A)$800. 
B)$200. 
C)$600. 
D)$1,000.

Quizplus · Accepted Answer

The profit-maximizing output for a monopolist is the quantity at which MR=MC. In this case, MR=$800-$1.6Q and MC=$200. Setting MR=MC, we get $800-$1.6Q=$200$, or Q=375. Substituting this into the demand function, we get P=$800-1.6(375)=$600. Therefore, the profit-maximizing price is $600.

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