select the correct location on the graph. indicate the point where a monopoly will set its price.
select the correct location on the graph. indicate the point where a monopoly will set its price.
Answer
Explanation:
Step1: Recall monopoly - pricing rule
A monopoly maximizes profit where marginal cost (MC) equals marginal revenue (MR). Then, it sets the price based on the demand curve at that quantity.
Step2: Locate the quantity
Find the intersection point of the marginal - cost (green line) and marginal - revenue (red line) curves. This gives the profit - maximizing quantity Q.
Step3: Determine the price
Go vertically from the quantity Q to the demand curve (blue line). The price on the y - axis at this intersection point is the price set by the monopoly.
Answer:
The point on the demand curve directly above the intersection of the marginal - cost and marginal - revenue curves, at the quantity Q.