For a monopolist to sell an output level of 10 units, the price must be $8. MR at this output level will be A) $8 and

Question

For a monopolist to sell an output level of 10 units, the price must be $8. MR at this output level will be A) > $8 and < $16. B) < $8. C) = $8. D) > $16.

Quizplus · Accepted Answer

As a monopolist, the firm will choose the output level where MR = MC to maximize its profit. If the firm can only sell 10 units at a price of $8, then the marginal revenue from selling the 10th unit will be $8 as well. This means that the monopolist has no incentive to increase the price as it will not result in any additional revenue. Therefore, the MR at this output level must be less than $8, which eliminates options A and D. The only option left is B, which states that MR must be less than $8, and this is the correct answer.

For a Monopolist to Sell an Output Level of 10