Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product. For a monopolist facing this demand curve, the profit-maximizing quantity is ________ and the profit-maximizing price is ________.
A)50; $2
B)100; $2
C)50; $3
D)100; $1

Question

Suppose Acme and Mega produce and sell identical products and face zero marginal and average cost. Below is the market demand curve for their product.  For a monopolist facing this demand curve, the profit-maximizing quantity is ________ and the profit-maximizing price is ________.
A)50; $2 
B)100; $2 
C)50; $3 
D)100; $1

Quizplus · Accepted Answer

For a monopolist facing this demand curve, the marginal revenue curve has a vertical intercept of $4 and a horizontal intercept of 100. Thus, marginal revenue equals marginal cost when quantity is 100. This corresponds to a price of $2 on the demand curve.

Suppose Acme and Mega Produce and Sell Identical Products and Face