Table 14-9
Consider the following demand and cost information for a monopoly.

-Refer to Table 14-9.What price should the monopoly charge to maximize profit?
A) $16
B) $20
C) $24
D) $28

Question

Table 14-9
Consider the following demand and cost information for a monopoly.
 
-Refer to Table 14-9.What price should the monopoly charge to maximize profit?
A) $16 
B) $20 
C) $24 
D) $28

Quizplus · Accepted Answer

The monopolist should produce where marginal revenue equals marginal cost to maximize profit. At a price of $24, the monopolist will sell 4 units, generating a total revenue of $96 (4 x $24). The marginal revenue of the fourth unit is $20, which is equal to the marginal cost of producing that unit. At any other price, the marginal revenue would be either greater or lower than the marginal cost, leading to a decrease in profit. Therefore, $24 is the optimal price.

Table 14-9 Consider the Following Demand and Cost Information for a Monopoly