The following figure shows the demand and marginal revenue for a monopolist, who has many buyers with different valuations of the good.Each buyer demands only one unit of the good, and only two are willing to pay $6.5 for it.The valuation decreases for each additional buyer as shown in the figure.The marginal cost of production is $3 per unit.

-Refer to Figure .If the profit maximizing monopolist does not practice discrimination, what uniform price will he charge and how much profit will he earn?

Question

The following figure shows the demand and marginal revenue for a monopolist, who has many buyers with different valuations of the good.Each buyer demands only one unit of the good, and only two are willing to pay $6.5 for it.The valuation decreases for each additional buyer as shown in the figure.The marginal cost of production is $3 per unit.

-Refer to Figure .If the profit maximizing monopolist does not practice discrimination, what uniform price will he charge and how much profit will he earn?

Quizplus · Accepted Answer

The monopolist will set a price where marginal revenue equals marginal cost to maximize profit. Without the figure, we typically assume this equilibrium point results in a price above marginal cost. The profit is calculated as (Price - Average Cost) * Quantity sold. Choice B suggests a scenario that aligns with typical outcomes where price is set above marginal cost, leading to a profit. However, without the specific figure details, this explanation assumes standard economic theory.

The Following Figure Shows the Demand and Marginal Revenue for a Monopolist