Table 14-4
A monopolist faces the following demand curve:

-Refer to Table 14-4.In order to maximize profits,the monopolist should produce
A) 7.5 units.
B) 10 units.
C) where marginal revenue equals marginal cost.
D) Both a)and c)are correct.

Question

Table 14-4
A monopolist faces the following demand curve:
 
-Refer to Table 14-4.In order to maximize profits,the monopolist should produce
A) 7.5 units. 
B) 10 units. 
C) where marginal revenue equals marginal cost. 
D) Both a)and c)are correct.

Quizplus · Accepted Answer

The monopolist should produce where marginal revenue equals marginal cost in order to maximize profits. In this case, that would be at a quantity of 8 units, where both marginal revenue and marginal cost are equal to $15. At any higher or lower quantity, the monopolist would either be producing at a point where marginal cost exceeds marginal revenue or vice versa, leading to a lower level of profit.

Table 14-4 A Monopolist Faces the Following Demand Curve