The following figure shows the marginal revenue (MR) curve and the demand curve faced by a monopolist. The monopolist faces a constant marginal cost of $3.

-Refer to the figure above.What is the price at which the monopolist should sell its output?

Question

The following figure shows the marginal revenue (MR) curve and the demand curve faced by a monopolist. The monopolist faces a constant marginal cost of $3.
 
-Refer to the figure above.What is the price at which the monopolist should sell its output?

Quizplus · Accepted Answer

A monopolist maximizes profit where marginal revenue equals marginal cost. In this case, the marginal cost is constant at $3. Looking at the graph, we can see that the marginal revenue curve intersects the demand curve at a quantity of 5. At this quantity, the marginal revenue is $6. Since the marginal cost is constant at $3, the monopolist should produce and sell at a quantity of 5, and charge a price of $6. Therefore, the answer is C) $6.

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