Figure 15-2

Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.To maximize profit, the firm will produce at output level
A)Q₁.
B)Q₂.
C)Q₃.
D)Q₄.

Question

Figure 15-2
  
Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.To maximize profit, the firm will produce at output level
A)Q₁. 
B)Q₂. 
C)Q₃. 
D)Q₄.

Quizplus · Accepted Answer

The monopolist will produce where marginal revenue (MR) is equal to marginal cost (MC) to maximize profits. In Figure 15-2, this occurs at output level Q₂, where the MR and MC curves intersect. At this output level, the firm can charge a price of P₂ and still sell all of its output. Producing at any other output level would result in lower profits. Therefore, the best choice is B, producing at output level Q₂.

Figure 15-2 Figure 15-2 Above Shows the Demand and Cost Curves Facing