Question

17a) Assuming the monopoly pictured is a profit-maximizing monopoly, what price will the monopoly charge for its output?

8 7 6 5 4 ATC=MC 3 2 1 MR P=D 0 1 2 3 4 5 6 7 8 9 10 Quantity (millions)

A: $4

B: $5

C: $6

D: $7

E: $8

17b) Assuming the monopoly (above picture, 16a) a profit-maximizing monopoly, what quantity of output would maximize revenue?

A: 1

B: 2

C: 3

D: 4

E: 5

Answer 1

As we know, a monopolist will produced that level of output where marginal revenue curve intersect the marginal cost curve and, as we can see from the above graph, the marginal revenue curve intersect the marginal cost curve at two units of output and associated price level is six dollar.

Ans: 17a, right answer is option C, that is, $6.

Ans: 17b, The right answer is option B, that is, 2.