The Figure Given Below Represents a Monopoly Firm Producing Perfume

question 1

Multiple Choice

The figure given below represents a monopoly firm producing perfume with downward sloping demand and marginal revenue (MR) curves.The products of this firm are sold in the competitive market by a retailer.Among the horizontal lines in the figure:
A - represents the marginal cost of per unit perfume production
B - represents the marginal cost of an independent perfume retailer
C - represents the sum of A and B
D - represents the marginal cost of the perfume monopolist for retailing its own output
E - represents the sum of A and D.


-Refer to Figure.What will be the profit maximizing output and price for the perfume monopolist if it is producing and retailing its output?

• A)Output = 1.7 units and price = $6.3
• B)Output = 2.3 units and price = $6.3
• C)Output = 2.3 units and price = $5.4
• D)Output = 1.7 units and price = $5

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