Exhibit 9-19

-To maximize profit (or minimize loss),the monopolist in Exhibit 9-19 should produce:

Question

Exhibit 9-19
 
-To maximize profit (or minimize loss),the monopolist in Exhibit 9-19 should produce:

Quizplus · Accepted Answer

To maximize profits, a monopolist should produce where marginal revenue (MR) equals marginal cost (MC). In this case, MR is given by the downward-sloping demand curve, and MC is given as the upward-sloping marginal cost curve. The point where MR intersects MC is at a quantity of 25 units. At this quantity, the monopolist can charge a price of $40 and earn a profit of $250 [(40-20)*25]. Producing more than 25 units brings in revenue, but at the expense of higher costs, which reduces profit. Therefore, the monopolist should produce 25 units.

Exhibit 9-19 -To Maximize Profit (Or Minimize Loss),the Monopolist in Exhibit 9-19