Exhibit 13-3 A monopolist

In Exhibit 13-3, if this is an unregulated monopoly firm, the price and output which would maximize profits are:
A) price = $8; output = 25.
B) price = $10; output = 25.
C) price = $5; output = 40.
D) price = $4; output = 25.

Question

Exhibit 13-3 A monopolist

In Exhibit 13-3, if this is an unregulated monopoly firm, the price and output which would maximize profits are:
A) price = $8; output = 25. 
B) price = $10; output = 25. 
C) price = $5; output = 40. 
D) price = $4; output = 25.

Quizplus · Accepted Answer

The profit maximizing point for a monopolist is where marginal revenue (MR) equals marginal cost (MC). In the given graph, the marginal cost curve intersects the marginal revenue curve at an output of 25 units. The corresponding price of $10 can be observed by locating the point on the demand curve at an output of 25 units. Hence, the answer is B.

Exhibit 13-3 a Monopolist