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 $6,at what price should it sell its output to maximize profits?

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 $6,at what price should it sell its output to maximize profits?

Quizplus · Accepted Answer

To maximize profits, the monopolist should produce where marginal revenue equals marginal cost, which is at a quantity of 5 units. From the demand curve, we can see that at a quantity of 5 units, the price is $12. Therefore, the monopolist should sell its output at a price of $12 to maximize profits.

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