The following figure shows the demand and marginal revenue (MR) curves faced by a monopolist.

-Refer to the figure above.What is the profit-maximizing quantity that the monopolist should produce if it faces a constant marginal cost of $5?

Question

The following figure shows the demand and marginal revenue (MR) curves faced by a monopolist.
 
-Refer to the figure above.What is the profit-maximizing quantity that the monopolist should produce if it faces a constant marginal cost of $5?

Quizplus · Accepted Answer

The profit-maximizing quantity is where marginal revenue equals marginal cost. The marginal revenue curve is the derivative of the total revenue curve, which is the product of price and quantity. The marginal cost curve is a horizontal line at $5. The profit-maximizing quantity is where the marginal revenue curve intersects the marginal cost curve. In this case, the marginal revenue curve intersects the marginal cost curve at a quantity of 200 units.

The Following Figure Shows the Demand and Marginal Revenue (MR)