Refer to Table 13.4. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $8 per unit of providing the product, then the monopoly maximizes its profits by charging per unit and selling units of output.

A) $12; 5
B) $14; 4
C) $10; 6
D) $18; 2

Question

Refer to Table 13.4. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $8 per unit of providing the product, then the monopoly maximizes its profits by charging ________ per unit and selling ________ units of output.

A) $12; 5
B) $14; 4
C) $10; 6
D) $18; 2

Aniket Khandelwal · Accepted Answer

Final Answer : B, Explanation :  To maximize profits, a monopoly produces where marginal revenue (MR) equals marginal cost (MC). Given a constant MC of $8, we look for the largest price above $8 where reducing the price to sell one more unit increases total revenue. From the table, selling at $14 (4 units) maximizes revenue above the MC of $8, as selling any additional unit (at a lower price) would not increase total revenue proportionally to the cost.

Refer to Table 13.4. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $8 per unit of providing the product, then the monopoly maximizes its profits by charging per unit and selling units of output.

A) $12; 5
B) $14; 4
C) $10; 6
D) $18; 2

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