Narrbegin Exhibit 8.4 Demand and cost curves for a monopolist
-As shown in Exhibit 8.4, in order to maximise its profit (or minimise its loss), what price should the monopoly charge for its product?
A) $60 per unit.
B) $90 per unit.
C) $120 per unit.
D) $150 per unit.

Question

Narrbegin Exhibit 8.4 Demand and cost curves for a monopolist  
-As shown in Exhibit 8.4, in order to maximise its profit (or minimise its loss), what price should the monopoly charge for its product?
A) $60 per unit. 
B) $90 per unit. 
C) $120 per unit. 
D) $150 per unit.

Quizplus · Accepted Answer

The monopolist should produce where marginal revenue equals marginal cost, which is at a quantity of 5 units. At this quantity, the monopolist will charge the highest price that consumers are willing to pay, which is $120 per unit. This price is found at the point where the demand curve intersects with the vertical line drawn from the quantity of 5 units.