Narrbegin Exhibit 8.2 Demand and cost information for a monopoly
$$\begin{array} { | c | c | c | }
\hline \text { Quantity } & \text { Price } & \text { Tatal Cost } \
\hline 0 & 40 & 10 \
\hline 1 & 30 & 15 \
\hline 2 & 20 & 25 \
\hline 3 & 10 & 40 \
\hline 4 & 0 & 60 \
\hline
\end{array}$$
-Refer to Exhibit 8.2. Using the rule that focuses on the marginal approach to maximising profits, the monopolist maximises profit by choosing price equal to:
A) $0.
B) $10.
C) $20.
D) $30.

Question

Narrbegin Exhibit 8.2 Demand and cost information for a monopoly
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \text { Tatal Cost } \
\hline 0 & 40 & 10 \
\hline 1 & 30 & 15 \
\hline 2 & 20 & 25 \
\hline 3 & 10 & 40 \
\hline 4 & 0 & 60 \
\hline
\end{array}$$ 
-Refer to Exhibit 8.2. Using the rule that focuses on the marginal approach to maximising profits, the monopolist maximises profit by choosing price equal to:
A) $0.
B) $10.
C) $20.
D) $30.

Quizplus · Accepted Answer

According to the marginal approach to maximizing profits, a monopolist should set their price at the point where marginal revenue (MR) is equal to marginal cost (MC). In the given exhibit, the marginal cost is constant at $10, and the marginal revenue is given by the equation MR = 80 - 2Q. Setting MR equal to MC (i.e., 10), we get 80 - 2Q = 10, which gives Q = 35. Substituting Q = 35 in the demand equation, we get P = 80 - 35 = $45. Therefore, the monopolist's optimum price is $45, which is the answer C).

Narrbegin Exhibit 8 -Refer to Exhibit 8