FIGURE 10- 4 Suppose a monopolist faces the demand curve and cost curves shown below.

-A single- price monopolist is currently producing an output level where P = $320,MR = $260,ATC = $280,and MC = $200.In order to maximize profits,this monopolist should

Question

FIGURE 10- 4 Suppose a monopolist faces the demand curve and cost curves shown below.
 
-A single- price monopolist is currently producing an output level where P = $320,MR = $260,ATC = $280,and MC = $200.In order to maximize profits,this monopolist should

Quizplus · Accepted Answer

To maximize profits, a monopolist should produce where MR = MC. Since MR ($260) is greater than MC ($200), the firm should increase production. Increasing production will lead to a lower price due to the downward-sloping demand curve faced by a monopolist.

FIGURE 10- 4 Suppose a Monopolist Faces the Demand Curve