Exhibit 9-12
-The total cost for the nondiscriminating monopolist in Exhibit 9-12, that maximizes profit while charging all customers the same price, is
A) $0d $\times$ 0f
B) $0e $\times$ 0f
C) $0b $\times$ 0f
D) $0a $\times$ 0f
E) $0c $\times$ 0g

Question

Exhibit 9-12 
-The total cost for the nondiscriminating monopolist in Exhibit 9-12, that maximizes profit while charging all customers the same price, is
A) $0d $\times$ 0f 
B) $0e $\times$ 0f 
C) $0b $\times$ 0f 
D) $0a $\times$ 0f 
E) $0c $\times$ 0g

Quizplus · Accepted Answer

The total cost for the monopolist is the sum of the fixed cost and the variable cost which is given by: 
TC = $60 + $5Q 
To maximize profit, the monopolist sets MR = MC:
MR = dTR/dQ = $100 - $0.05Q 
MC = dTC/dQ = $5 
Setting MR = MC, we get: 
$100 - $0.05Q = $5 
$0.05Q = $95 
Q = 1900 
Therefore, the total cost is: 
TC = $60 + $5(1900) = $9610 
Dividing the total cost by the quantity sold, we get the average cost: 
AC = TC/Q = $9610/1900 = $5.05 
Therefore, the price charged by the monopolist is equal to the average cost: 
P = AC = $5.05 
The revenue of the monopolist is: 
TR = P x Q = $5.05 x 1900 = $9595 
Therefore, the monopolist's profit is: 
Profit = TR - TC = $9595 - $9610 = -$15 
Since the monopolist is making a loss, there is no best choice in this case.

Exhibit 9-12 -The Total Cost for the Nondiscriminating Monopolist ×\times×

Exhibit 9-12
-The Total Cost for the Nondiscriminating Monopolist $\times$