Suppose the table below describes the demand for a good produced by monopolist. $$\begin{array} { | c | c | }
\hline \text { Price } & \text { Quantity } \
\hline \$ 10 & 1 \
\hline \$ 9 & 2 \
\hline \$ 8 & 3 \
\hline \$ 7 & 4 \
\hline \$ 6 & 5 \
\hline \$ 5 & 6 \
\hline \$ 4 & 7 \
\hline
\end{array}$$ Based on the data in the table, we know the firm should:

Question

Suppose the table below describes the demand for a good produced by monopolist. $$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity } \
\hline \$ 10 & 1 \
\hline \$ 9 & 2 \
\hline \$ 8 & 3 \
\hline \$ 7 & 4 \
\hline \$ 6 & 5 \
\hline \$ 5 & 6 \
\hline \$ 4 & 7 \
\hline
\end{array}$$ Based on the data in the table, we know the firm should:

Quizplus · Accepted Answer

A monopolist maximizes profit where marginal revenue equals marginal cost. The table shows that the marginal revenue for each additional unit sold is less than the previous unit sold. Therefore, the monopolist must lower the price to sell more units. 
At the output level of 6 units, the price is $5 and marginal cost is also $5. However, the marginal revenue of the sixth unit is $4 which is less than the marginal cost. Therefore, the monopolist will not produce the seventh unit as it will incur losses.

Suppose the Table Below Describes the Demand for a Good