Exhibit 8-4 Demand and cost curves for a monopolist

-As shown in Exhibit 8-4,in order to maximize its profit (or minimize its loss),what price should the monopoly charge for its product?
A) $60 per unit.
B) $90 per unit.
C) $120 per unit.
D) $150 per unit.

Question

Exhibit 8-4 Demand and cost curves for a monopolist
 
-As shown in Exhibit 8-4,in order to maximize its profit (or minimize its loss),what price should the monopoly charge for its product?
A) $60 per unit. 
B) $90 per unit. 
C) $120 per unit. 
D) $150 per unit.

Quizplus · Accepted Answer

The profit maximizing output is where MR = MC. In this case, it occurs at a quantity of 20 units. At this output, the demand curve intersects the marginal cost curve at a price of $120 per unit. This price allows the firm to maximize its profit, represented by the shaded rectangle in the exhibit. At any price other than $120, the firm would not be maximizing its profit.

Exhibit 8-4 Demand and Cost Curves for a Monopolist