The following figure shows the demand curve, the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve of a monopolist.

-Refer to the figure above.When the monopolist is free to set the price,________.

Question

The following figure shows the demand curve, the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve of a monopolist.
 
-Refer to the figure above.When the monopolist is free to set the price,________.

Quizplus · Accepted Answer

When the monopolist is free to set the price, it will choose the quantity where marginal revenue equals marginal cost, which is Q = 6. At this quantity, the price it can charge is $300, which is the point where the demand curve intersects with the MR curve. At this price, the average total cost is $150, which is the point where the ATC curve intersects with the demand curve. Therefore, the monopolist makes a profit of ($300 - $150) x 6 = $900.

The Following Figure Shows the Demand Curve, the Marginal Revenue