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

-Refer to the figure above.If the monopolist faces a constant marginal cost of $2,what is the optimal quantity that it should produce?

Question

The following figure shows the marginal revenue (MR) and demand curves faced by a monopolist.
 
-Refer to the figure above.If the monopolist faces a constant marginal cost of $2,what is the optimal quantity that it should produce?

Quizplus · Accepted Answer

The monopolist will maximize its profits by producing where MR=MC. At a marginal cost of $2, the intersecting point of MR and MC curve is at 40 units. Therefore, the optimal quantity that the monopolist should produce is 40 units.

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