Exhibit 10-2
-To ascertain the profit-maximizing price on a monopoly diagram, one must first determine output by finding where
A)marginal cost and marginal revenue cross, and then doubling the amount indicated on the vertical axis to determine price.
B)marginal cost and demand cross, and then looking at the vertical axis to determine price.
C)marginal cost and marginal revenue cross, and then extending upward to the demand curve to determine price on the vertical axis.
D)marginal cost and marginal revenue cross, and then looking at that point on the vertical axis to determine price.
E)marginal revenue crosses the horizontal axis, and then noting what price demand indicates at that output level.

Question

Exhibit 10-2 
-To ascertain the profit-maximizing price on a monopoly diagram, one must first determine output by finding where
A)marginal cost and marginal revenue cross, and then doubling the amount indicated on the vertical axis to determine price. 
B)marginal cost and demand cross, and then looking at the vertical axis to determine price. 
C)marginal cost and marginal revenue cross, and then extending upward to the demand curve to determine price on the vertical axis. 
D)marginal cost and marginal revenue cross, and then looking at that point on the vertical axis to determine price. 
E)marginal revenue crosses the horizontal axis, and then noting what price demand indicates at that output level.

Quizplus · Accepted Answer

The profit-maximizing price on a monopoly diagram is determined by finding the point where marginal cost and marginal revenue intersect, and then extending upward to the demand curve to determine the price on the vertical axis. This is because the profit-maximizing quantity will be where marginal cost equals marginal revenue, but the price is determined by the demand curve at that quantity. Option A is incorrect as it suggests doubling the output to determine price, which is not accurate. Option B is incorrect as it suggests using demand instead of marginal revenue, which can be different. Option D is incorrect as it suggests looking at the point of intersection on the vertical axis, which is also not accurate. Option E is incorrect as it suggests using the horizontal axis, which is not relevant for determining price.

Exhibit 10-2 -To Ascertain the Profit-Maximizing Price on a Monopoly Diagram, One