Exhibit 8-4 Demand and cost curves for a monopolist

As shown in Exhibit 8-4, in order to maximize its profit (or minimize its loss), what price should the monopoly charge for its product?

Question

Exhibit 8-4 Demand and cost curves for a monopolist

As shown in Exhibit 8-4, in order to maximize its profit (or minimize its loss), what price should the monopoly charge for its product?

Quizplus · Accepted Answer

The profit-maximizing price for the monopolist is found where marginal revenue (MR) equals marginal cost (MC). This occurs at a quantity of 40 units and a price of $120 per unit. At this price and quantity, the monopolist's total revenue is $4,800 and its total cost is $3,600, resulting in a profit of $1,200.

Exhibit 8-4 Demand and Cost Curves for a Monopolist