Figure 10-1 Figure 10-1 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 10-1.The firm's profit-maximizing price is

Question

Figure 10-1 Figure 10-1 above shows the demand and cost curves facing a monopolist. -Refer to Figure 10-1.The firm's profit-maximizing price is A)P₁. B)P₂. C)P₃. D)P₄.

Quizplus · Accepted Answer

The profit-maximizing price is where marginal revenue (MR) equals marginal cost (MC). In Figure 10-1, this occurs at output level Q2 and price PS1U1B13S1U1B0. At this price, the firm is producing Q2 units and earning a profit equal to the shaded rectangle PS1U1B13S1U1B2. Any higher or lower price would result in a lower profit for the firm.

Figure 10-1 Figure 10-1 Above Shows the Demand and Cost