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Question
The following table depicts the cost and demand structure a natural monopoly faces. Provided that the firm operates as a monopolist, what is the price charged and quantity produced in order to maximize profits?
| Quantity | Price ($) | Total Revenue | Marginal Revenue | Total Cost | Marginal Cost |
| 0 | 1,000 | 0 | 0 | 0 | 0 |
| 1 | 900 | 900 | 900 | 800 | 800 |
| 2 | 800 | 1,600 | 700 | 1,400 | 600 |
| 3 | 700 | 2,100 | 500 | 1,900 | 500 |
| 4 | 600 | 2,400 | 300 | 2,400 | 500 |
| 5 | 500 | 2,500 | 100 | 2,800 | 400 |
| 6 | 400 | 2,400 | 100 | 3,200 | 400 |
A) price charged of $900 and quantity produced of 1
B) price charged of $800 and quantity produced of 2
C) price charged of $700 and quantity produced of 3
D) price charged of $600 and quantity produced of 4
Answer
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