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Homework answers / question archive / If a monopolist is producing the profit maximizing output level and at this output level, the marginal cost is $4 and the profit maximizing price is $9, what is the markup? A

If a monopolist is producing the profit maximizing output level and at this output level, the marginal cost is $4 and the profit maximizing price is $9, what is the markup? A

Marketing

If a monopolist is producing the profit maximizing output level and at this output level, the marginal cost is $4 and the profit maximizing price is $9, what is the markup?

A. 2

B. 5

C. 2.25

D. 0.22

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Let us compute the markup. The formula is:

  • Marginal cost x Mark-up = Price
  • Mark-up = Price / Marginal cost

Based on the information given, the marginal cost is $4 and the price is $9.

  • Mark-up = $9 / $4 = $2.25

Therefore, the mark-up is C. 2.25.

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