Figure 11-6
-The profit-maximizing monopolist in Figure 11-6 will produce ____ units of output.

Question

Figure 11-6 -The profit-maximizing monopolist in Figure 11-6 will produce ____ units of output. A)Q₁ B)Q₂ C)Q3 D)Q4

Quizplus · Accepted Answer

The profit-maximizing output is where marginal revenue (MR) equals marginal cost (MC), which is at point A where Q = QS1U1B1. At that level of output, the monopolist can charge a price of P = PS1U1B1 and earn a profit represented by the shaded rectangle. A higher level of output, such as Q2 or Q3, would require a lower price to sell, resulting in lower total revenue that would not cover the higher total cost of producing that output. A lower level of output, such as Q1, would allow the monopolist to charge a higher price, but the quantity sold would not be enough to maximize profit. Therefore, the best choice is B, producing QS1U1B12S1U1B0 units of output.

Figure 11-6 -The Profit-Maximizing Monopolist in Figure 11-6 Will Produce ____ Units