Use the following to answer question:
-(Table: Lunch)Use Table: Lunch.This table shows market demand for picnic lunches for people taking all-day rafting trips on the river.Joe has a firm providing this service,and his marginal cost and average cost for each lunch are a constant $4.If Joe is a monopolist,what price will he charge for a lunch in the long run?
A)$9
B)$7
C)$5
D)$3

Question

Use the following to answer question: 
-(Table: Lunch)Use Table: Lunch.This table shows market demand for picnic lunches for people taking all-day rafting trips on the river.Joe has a firm providing this service,and his marginal cost and average cost for each lunch are a constant $4.If Joe is a monopolist,what price will he charge for a lunch in the long run?
A)$9 
B)$7 
C)$5 
D)$3

Quizplus · Accepted Answer

As a monopolist, Joe will maximize his profit by producing at a quantity where marginal cost (MC) equals marginal revenue (MR). In the long run, he will also need to cover his average costs to avoid losses. Given that his MC and average cost are a constant $4, he will set a price above $4 to cover these costs and to earn a profit. Without the specific demand curve data, we typically assume the monopolist will charge a higher price than the competitive market price to maximize profit. Among the given options, $7 is the plausible price that allows Joe to cover costs and earn a profit, assuming it aligns with a point where MC equals MR on the demand curve.

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