Exhibit 9.4
-Refer to Exhibit 9.4,which shows the total cost and total revenue curves for a monopolist.The profit-maximizing output for the monopolist is _____

Question

Exhibit 9.4 
-Refer to Exhibit 9.4,which shows the total cost and total revenue curves for a monopolist.The profit-maximizing output for the monopolist is _____

Quizplus · Accepted Answer

The profit-maximizing output for a monopolist occurs at the point where marginal revenue (MR) equals marginal cost (MC), as long as price is greater than or equal to average variable cost (AVC). In this case, we can see that the marginal cost curve intersects the marginal revenue curve at a quantity of 3 units. At this output level, the monopolist can charge a price of $8 and earn a total profit of $9. The monopolist would not want to produce any less than 3 units since at lower levels of output, the marginal cost is less than marginal revenue, and the monopolist is not maximizing profits. At quantities higher than 3, the marginal cost exceeds marginal revenue and producing additional units would lead to a reduction in profits. Therefore, the answer is choice C) 3 units.

Exhibit 9.4 -Refer to Exhibit 9.4,which Shows the Total Cost and Total