Use the table to answer the following question.
Table 11-2
The demand and total cost schedules of a monopolist are presented in Table 11-2. What price should a profit-maximizing monopolist charge?
A) $10
B) $9
C) $8
D) $7

Question

Use the table to answer the following question.
Table 11-2
 The demand and total cost schedules of a monopolist are presented in Table 11-2. What price should a profit-maximizing monopolist charge?
A) $10 
B) $9 
C) $8 
D) $7

Quizplus · Accepted Answer

To maximize profit, the monopolist should produce where marginal revenue (MR) equals marginal cost (MC). In this case, the quantity where MR equals MC is 6. At a quantity of 6, the price that the monopolist can charge is $9, which is the highest price that consumers are willing to pay for that quantity. At this price, the monopolist will earn a profit equal to total revenue (6 x $9 = $54) minus total cost (6 x $7 = $42), which is $12. Charging a lower price would result in a smaller profit or even a loss, while charging a higher price would result in fewer sales and a smaller profit. Therefore, the profit-maximizing price is $9.

Use the Table to Answer the Following Question