Figure 11-9

In Figure 11-9, how much more than the long-run competitive price will the profit-maximizing monopolist charge?
A)$1
B)$2
C)$3
D)$11

Question

Figure 11-9

In Figure 11-9, how much more than the long-run competitive price will the profit-maximizing monopolist charge?
A)$1 
B)$2 
C)$3 
D)$11

Quizplus · Accepted Answer

The profit-maximizing monopolist will produce where marginal cost equals marginal revenue, which is at quantity Qm. At this quantity, the monopolist will charge the price of Pm. The long-run competitive price would be at the point where the demand curve intersects with the marginal cost curve, which is at quantity Qc and price Pc. The difference between Pm and Pc is $3, so the monopolist will charge $3 more than the long-run competitive price. Therefore, the correct answer is C) $3.

Figure 11-9 In Figure 11-9, How Much More Than the Long-Run Competitive