The following table shows the price and revenue for a monopolist at different levels of production.The monopolist incurs no marginal cost of production.

$$\begin{array} { | c | c | c | }
\hline \text { Quantity } & \text { Price } & \text { Revenue } \
\hline 2 & 16 & 32 \
\hline 3 & 15 & 45 \
\hline 4 & 14.5 & 58 \
\hline 5 & 11.6 & 58 \
\hline 6 & 9.5 & 57 \
\hline 7 & 8 & 56\
\hline
\end{array}$$

-Refer to Table .The profit maximizing output level in this case is determined by which of the following criteria?

Question

The following table shows the price and revenue for a monopolist at different levels of production.The monopolist incurs no marginal cost of production.

$$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \text { Revenue } \
\hline 2 & 16 & 32 \
\hline 3 & 15 & 45 \
\hline 4 & 14.5 & 58 \
\hline 5 & 11.6 & 58 \
\hline 6 & 9.5 & 57 \
\hline 7 & 8 & 56\
\hline
\end{array}$$

-Refer to Table .The profit maximizing output level in this case is determined by which of the following criteria?

Quizplus · Accepted Answer

Since the monopolist has no marginal cost of production, profit maximization occurs where marginal revenue equals zero. At any level of production below this point, increasing output would result in marginal revenue being greater than zero, which means that the monopolist would gain more revenue from producing one more unit. However, at any level of production beyond this point, decreasing output would result in marginal revenue being less than zero, which means that the monopolist would lose more revenue from producing one less unit. Therefore, the monopolist will produce the quantity where marginal revenue equals zero to maximize profit. This occurs at the output level of 4 units, where the price is $14.50 and the revenue is $58.

The Following Table Shows the Price and Revenue for a Monopolist