The Figure Given Below Represents a Monopoly Firm Producing Perfume

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 wholesale price of the perfume monopolist if it produces the output and allows an individual retailer to market the product?

A) Output = 1.7 units and price = $5.4
B) Output = 2.3 units and price = $3.4
C) Output = 2.3 units and price = $5.4
D) Output = 1.7 units and price = $5