Question

At the profit-maximizing output in a monoploy-controlled market, the price a monopolist charges is :

Answer 1

In case of monopoly the monopolist is having the market power. The monopolist will maximize profit by equating MR to MC.

Total Revenue, TR = PQ

Total Cost, TC

Profit = TR - TC

Differentiating above equation wrt Q we get

In order to maximize profit the first derivative is set equal to zero

Therefore, MR = MC

The monopolist will maximize profit at that point where MR = MC

At this point the firm will set price higher than the Marginal cost. Refer the attached picture below

The monopolist will charge a price of Pm which is above the Marginal cost curve.

Please contact if having any query thank you.