Suppose a monopolist faces the demand curve and cost curves shown below. FIGURE 10-5
-Refer to Figure 10-5.This single-price monopolist would maximize total revenue by producing the quantity

Question

Suppose a monopolist faces the demand curve and cost curves shown below.  FIGURE 10-5
-Refer to Figure 10-5.This single-price monopolist would maximize total revenue by producing the quantity

Quizplus · Accepted Answer

To maximize total revenue, the monopolist should produce the quantity at which marginal revenue (MR) equals zero. In this case, that occurs at quantity QS1U1B13. At any quantity larger than that, MR is negative, which means that producing an additional unit of output would decrease total revenue. At any quantity smaller than that, MR is positive, which means that producing an additional unit of output would increase total revenue. Therefore, producing QS1U1B13 would maximize total revenue.

Suppose a Monopolist Faces the Demand Curve and Cost Curves