Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-2. If the marginal cost of producing this good is 4, what price would a profit-maximizing monopolist charge for the product?
A)P = 4
B)P = 10
C)P = 12
D)P = 20

Question

Quizplus · Accepted Answer

To maximize profit, a monopolist will set marginal cost equal to marginal revenue and solve for the quantity that yields this profit-maximizing price. 
So, 4 = 20 - 2Q 
2Q = 16 
Q = 8 units 
Then, plug in Q=8 in the demand curve to get the price: 
P = 20 - Q = 20 - 8 = 12 
Thus, the monopolist would charge a price of $12 for the product.

Scenario 16-2 Suppose Market Demand for a Product Is Given by the by the Equation