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Figure 1 Model for a Monopoly Market Price I Marginal Cost 20 15 10 Demand 100 Quantity 150 200 Marginal Revenue Refer to Figure 1
Figure 1 Model for a Monopoly Market Price I Marginal Cost 20 15 10 Demand 100 Quantity 150 200 Marginal Revenue Refer to Figure 1. What is the profit maximizing quantity for the producer to produce ? A 100 B 150 ? none of th above D 200 Figure 2 depicts a situation in a monopolistically competitive market.
Expert Solution
A monopolist make quantity decision similar to a perfectly competitive market but his price decisions differs because he is a price maker, not price-taker. To maximize profit, a monopolist will set a quantity level at which margins cost curve cuts marginal revenue curve. Here, profit maximizing quantity would be 100 units because at this output level, MC cuts MR. Hence, the correct option is: A. 100.
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