The following figure shows the revenue curves of a monopolist:
Figure 11.6
D: Average revenue
MR: Marginal revenue
-In Figure 11.6, assume that marginal costs are constant at $2,500 and fixed costs are zero. What price and output level would result from perfect competition?
A)P = $2,500, Q = 400
B)P = $2,500, Q = 200
C)P = $5,000, Q = 0
D)P = $4,000, Q = 400
E)P = $4,000, Q = 200

Question

The following figure shows the revenue curves of a monopolist:
Figure 11.6
  D: Average revenue
MR: Marginal revenue
-In Figure 11.6, assume that marginal costs are constant at $2,500 and fixed costs are zero. What price and output level would result from perfect competition?
A)P = $2,500, Q = 400 
B)P = $2,500, Q = 200 
C)P = $5,000, Q = 0 
D)P = $4,000, Q = 400 
E)P = $4,000, Q = 200

Quizplus · Accepted Answer

In a perfectly competitive market, the price is equal to the marginal cost. Since the marginal cost is given as $2,500 and fixed costs are zero, the price would be $2,500. Without the figure, we cannot determine the exact quantity, but option A is the only one that correctly matches the price to the marginal cost.

The Following Figure Shows the Revenue Curves of a Monopolist