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 $10,at what price should it sell its output?

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 $10,at what price should it sell its output?

Quizplus · Accepted Answer

A monopolist maximizes profit by producing where marginal cost equals marginal revenue. If the marginal cost is constant at $10, the monopolist will set a price above this to maximize profit. Without the demand curve, we assume the price is higher than the marginal cost, making $14 a plausible choice.

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