Table 15-9
Consider the following demand and cost information for a monopoly.
-Refer to Table 15-9. What is the marginal cost of the 4th unit?
A)$4
B)$14
C)$31
D)$62

Question

Table 15-9
Consider the following demand and cost information for a monopoly. 
-Refer to Table 15-9. What is the marginal cost of the 4th unit?
A)$4 
B)$14 
C)$31 
D)$62

Quizplus · Accepted Answer

The marginal cost for the 4th unit is $14, which is found by taking the difference between the total cost of producing 4 units ($70) and the total cost of producing 3 units ($56). To maximize profits, the monopoly will produce where marginal revenue equals marginal cost. At a price of $35, the monopoly can sell a quantity of 3 units, where marginal revenue equals marginal cost ($28). However, at a price of $20, the monopoly can sell a quantity of 4 units, where marginal revenue is also $20 and marginal cost is $14. Thus, the best choice would be to sell the 4th unit at a price of $20.

Table 15-9 Consider the Following Demand and Cost Information for a Monopoly