Exhibit 9-7 Monopolist

-According to the information provided in Exhibit 9-7, if the Rudd Ice Company was a monopoly and is currently charging a price of $10, what would you advise Rudd to do?

Question

Exhibit 9-7 Monopolist
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-According to the information provided in Exhibit 9-7, if the Rudd Ice Company was a monopoly and is currently charging a price of $10, what would you advise Rudd to do?

Quizplus · Accepted Answer

Based on the graph, a monopoly firm maximizes profits where marginal revenue (MR) equals marginal cost (MC) at output level Qm and price Pm. Currently, Rudd Ice Company is charging a price of $10 and producing an output level of Q1. From the graph, we can see that at this output level, the marginal cost (MC) is less than the marginal revenue (MR), indicating that they can increase output without decreasing profits. Therefore, the best choice for Rudd Ice Company is to decrease the price to increase output to Qm, the profit-maximizing output level.

Exhibit 9-7 Monopolist ​

Exhibit 9-7 Monopolist