-Figure 10-5 shows the cost and demand curves facing a monopolist whose marginal cost is constant.The firm has no fixed costs.If it does not discriminate,it will produce
A)Q** units and charge price P'
B)Q* units and charge price P
C)between Q* and Q** units while charging a price between P and P'
D)between 0 and Q* units while charging price P
E)Q* units and charge price P'

Question

-Figure 10-5 shows the cost and demand curves facing a monopolist whose marginal cost is constant.The firm has no fixed costs.If it does not discriminate,it will produce
A)Q** units and charge price P' 
B)Q* units and charge price P 
C)between Q* and Q** units while charging a price between P and P' 
D)between 0 and Q* units while charging price P 
E)Q* units and charge price P'

Quizplus · Accepted Answer

A monopolist maximizes profit where marginal cost (MC) equals marginal revenue (MR). Given that the firm has no fixed costs and constant marginal cost, it will produce Q* units where MC = MR and charge price P, which is the price on the demand curve at that quantity.

-Figure 10-5 Shows the Cost and Demand Curves Facing a Monopolist