Consider the following AR and MR curves for a single-price monopolist. FIGURE 10-2
-Refer to Figure 10-2. If marginal costs were positive and constant but less than A, the profit-maximizing output for a single-price monopolist would be

Question

Consider the following AR and MR curves for a single-price monopolist.  FIGURE 10-2
-Refer to Figure 10-2. If marginal costs were positive and constant but less than A, the profit-maximizing output for a single-price monopolist would be

Quizplus · Accepted Answer

At the profit maximizing output, marginal revenue equals marginal cost. In this case, MC is less than A but greater than 0. At output Q₁, the MC curve intersects MR curve at Point A, where the monopolist maximizes profit. But if MC is less than A and constant, the monopolist would produce more than Q₁. This is because producing more units would increase the profit as the marginal cost is less than the price. The optimal output will be where MC=MR, which is greater than Q₁ but less than Q₂. Therefore, the correct answer is (C) greater than zero, but less than Q₂.

Consider the Following AR and MR Curves for a Single-Price