indicate the point where a monopoly will set its price.
indicate the point where a monopoly will set its price.
Answer
Explanation:
Step1: Recall monopoly pricing rule
A monopoly maximizes profit where marginal revenue (MR) equals marginal cost (MC). Then, it sets the price based on the demand curve at that output - level.
Step2: Identify the output level
Find the intersection of the marginal - revenue (red line) and marginal - cost (green line) curves. This gives the profit - maximizing output level $Q$.
Step3: Determine the price
From the output level $Q$, go up vertically until you hit the demand curve (blue line). The corresponding price on the $y$ - axis is the price the monopoly will set.
Answer:
The point on the demand curve corresponding to the output level where marginal revenue equals marginal cost.