The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of the output. Table 10.3

- What is the profit-maximizing output level for the monopoly firm described in Table 10.3,if the firm is earning a positive economic profit?
A)1 unit
B)3 units
C)5 units
D)8 units
E)9 units

Question

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of the output. Table 10.3

- What is the profit-maximizing output level for the monopoly firm described in Table 10.3,if the firm is earning a positive economic profit?
A)1 unit 
B)3 units 
C)5 units 
D)8 units 
E)9 units

Quizplus · Accepted Answer

The profit maximizing output level for a monopolist is where marginal revenue equals marginal cost. Looking at the table, we can see that at Q=8, MR=MC. At this output level, the monopolist can charge a price of $24, which is higher than the marginal cost of producing the 8th unit ($20) and results in a positive economic profit of $32 ($192 - $160). Therefore, D is the correct answer.

The Table Given Below Shows the Prices Charged and Marginal