The figure shows the marginal reverue MR and demand curves f

The figure shows the marginal reverue (MR) and demand curves faced by a monopolist it the monopolist faces a constant marginal cost of $6, at what price should it sel its output to maximize profts? Price/Cost (S) 20 18 16 14 12 10 OC. $10 O D. $2 10 20 30 4050 60 70 80 90 Qua Click to select your answer

Solution

A monopolist maximizes profit when marginal revenue is equal to marginal cost . MR = MC . It is given that he faces a constant marginal cost of $6 . So MR should be 6$ . At MR = 6 the corresponding point on demand curve is 12 $ . So answer is $12