Figure 15-4
The figure below depicts the demand and marginal cost curves of a profit-maximizing monopolist.

-Refer to Figure 15-4.A benevolent social planner would have the monopoly operate at an output level
A)below Q₀.
B)above Q₀.
C)equal to Q₀.
D)equal to zero.

Question

Figure 15-4
The figure below depicts the demand and marginal cost curves of a profit-maximizing monopolist.
 
-Refer to Figure 15-4.A benevolent social planner would have the monopoly operate at an output level
A)below Q₀. 
B)above Q₀. 
C)equal to Q₀. 
D)equal to zero.

Quizplus · Accepted Answer

A benevolent social planner would choose an output level where the marginal cost curve intersects the demand curve, which is at quantity Q₀ in this case. This is because at this level, the social welfare is maximized, as the benefit to consumers from producing an additional unit of output (the price they are willing to pay) is equal to the cost to society of producing that unit (the marginal cost).

Figure 15-4 The Figure Below Depicts the Demand and Marginal Cost Curves