Questions: Use Figure: Short-Run Monopoly in the Market for Electricity. The profit-maximizing price is:

Solution Steps

• In a monopoly, the profit-maximizing quantity is found where the Marginal Revenue (MR) curve intersects the Marginal Cost (MC) curve.
• From the graph, the MR and MC curves intersect at quantity \( R \).

• To find the profit-maximizing price, extend a vertical line from the quantity \( R \) up to the Demand curve.
• The point where this vertical line intersects the Demand curve gives the price.
• From the graph, this intersection occurs at price \( O \).

• Ensure that the price \( O \) is above the Average Total Cost (ATC) at quantity \( R \) to confirm that the firm is making a profit.
• From the graph, price \( O \) is indeed above the ATC curve at quantity \( R \).

Final Answer