Which of the output levels shown in Figure 10-10 would a monopolist never produce?
A)1 unit
B)4 units
C)7 units
D)3 units
E)5 units

Question

Quizplus · Accepted Answer

A monopolist maximizes profits by producing the quantity where marginal revenue equals marginal cost. In Figure 10-10, the marginal cost curve intersects the marginal revenue curve at points A, B, D, and E. Therefore, a monopolist could potentially produce 1 unit, 3 units, 4 units, or 5 units. However, at a quantity of 7 units, the marginal cost curve is above the marginal revenue curve, indicating that producing the 7th unit would result in a loss for the monopolist. Therefore, a monopolist would never produce 7 units.

Which of the Output Levels Shown in Figure 10-10 Would