Exhibit 9-4 Demand and cost curves for a monopolist

-As shown in Exhibit 9-4, in order to maximize its profit (or minimize its loss), how much output should the monopoly produce?

Question

Exhibit 9-4 Demand and cost curves for a monopolist
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-As shown in Exhibit 9-4, in order to maximize its profit (or minimize its loss), how much output should the monopoly produce?

Quizplus · Accepted Answer

To maximize profit or minimize loss, the monopoly should produce where MR=MC. This occurs at an output level of 4 units per hour. At this output level, the monopoly can charge a price of $6 and has a total cost of $16, resulting in a profit of $8. Producing any lower or higher level of output would result in a lower profit or a loss.

Exhibit 9-4 Demand and Cost Curves for a Monopolist