Refer to the following figure showing demand and marginal revenue for a monopoly. If production costs are constant and equal to $10 ,what price will the monopoly charge?

Question

Refer to the following figure showing demand and marginal revenue for a monopoly.  If production costs are constant and equal to $10 ,what price will the monopoly charge?

Quizplus · Accepted Answer

The monopoly will choose to produce where marginal cost equals marginal revenue, which is at a quantity of 5 units. At this quantity, the demand curve intersects with the marginal cost curve. The price charged will be the corresponding price on the demand curve at this quantity, which is $20. Therefore, the best choice is D.

Refer to the Following Figure Showing Demand and Marginal Revenue