Table 17-2. The table shows the town of Pittsville's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline.

-Refer to Table 17-2.If the market for gasoline in Pittsville is a monopoly,then the profit-maximizing monopolist will charge a price of

Question

Table 17-2. The table shows the town of Pittsville's demand schedule for gasoline. For simplicity, assume the town's gasoline seller(s) incur no costs in selling gasoline.
 
-Refer to Table 17-2.If the market for gasoline in Pittsville is a monopoly,then the profit-maximizing monopolist will charge a price of

Quizplus · Accepted Answer

In order to maximize profits, a monopoly sets the price where marginal revenue (MR) equals marginal cost (MC). In this case, since the seller incurs no costs, the MC is zero. Therefore, the monopolist will set the price at the point where MR equals zero, which is at a quantity of 500 gallons and a price of $5. At any higher price, the quantity demanded would be too low to maximize profits, and any lower price would not maximize total revenue.