Question

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist.

P	Qd
$10	1
7	2
5	3
3	4
1	5

The profit-maximizing monopolist will sell at a price

Group of answer choices

of $7.

of $5.

that cannot be determined with the information provided.

of $10.

Answer 1

Option C.

• The main aim of a profit maximizing monopolist is to choose that quantity of output and price at which it can maximize it's profits.
• It usually chooses that quantity of output where the marginal cost equals the marginal revenue and analyses both the marginal cost and marginal revenue to determine the profit maximizing price and quantity.
• If the firm's marginal revenue exceeds the marginal cost, then it will increase the number of units produced of a good and decrease the price to earn more profits. Similarly it will decrease the number of units produced when the marginal cost exceeds the marginal revenue.
• In the above table, we are not given the marginal revenue and marginal cost of the firm. Hence we cannot determine the profit maximizing price of the monopolist.