The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of output.Table 11.3

-Suppose you inherit the only spring of mineral water in an area and want to maximize profits from this costless product. You would ask your customers to bring their containers with them and:
A)charge them the highest price possible to sell some output.
B)charge them the lowest price possible to sell as much as you can.
C)ask them how much they would like to pay and accept it.
D)charge the price at which MR is zero.
E)charge the price at which MR is maximum.

Question

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of output.Table 11.3
 
-Suppose you inherit the only spring of mineral water in an area and want to maximize profits from this costless product. You would ask your customers to bring their containers with them and:
A)charge them the highest price possible to sell some output. 
B)charge them the lowest price possible to sell as much as you can. 
C)ask them how much they would like to pay and accept it. 
D)charge the price at which MR is zero. 
E)charge the price at which MR is maximum.

Quizplus · Accepted Answer

To maximize profits, you should charge the price at which marginal revenue (MR) is zero, as this is where total revenue is maximized, given that the product has no cost.

The Table Given Below Shows the Prices Charged and Marginal