Final answer:
A monopolist decides what price to charge by choosing the quantity where MR = MC and drawing a line to the demand curve. In this case, the monopolist will charge a price of $2.
Step-by-step explanation:
When a monopolist identifies its profit-maximizing quantity of output, it decides what price to charge by following a specific process. In step 1, the monopolist chooses the quantity where marginal revenue (MR) equals marginal cost (MC).
This quantity is the profit-maximizing level of output. In step 2, the monopolist determines the price by drawing a line straight up from the chosen quantity to the demand curve. The corresponding point on the demand curve represents the profit-maximizing price.
In this case, the monopolist faces demand MWTP(Q) = 12 - 2Q, where Q is the quantity. Assuming the monopolist must charge the same price for each unit it sells, it will choose the profit-maximizing quantity where MR = MC, which occurs at Q = 5. Therefore, it will charge the corresponding price by drawing a line from Q = 5 to the demand curve, which gives a price of P = $2.