Figure 10.1.2
-Refer to Figure 10.1.2 above. When the monopoly maximizes profit, how much is the amount of profit?

Question

Quizplus · Accepted Answer

When the monopoly maximizes profit, it produces at the quantity where marginal revenue equals marginal cost, which is Q = 6. At this quantity, price is $16.60 and marginal cost is $4.00, so the monopoly's profit is ($16.60 - $4.00) x 6 = $75.60. However, since there is a deadweight loss of ($16.60 - $6.00) x 6 / 2 = $30.60, the net profit is only $75.60 - $30.60 = $45.00. Therefore, the correct choice is C, $15.6, which is the profit per unit at Q = 6.

Figure 10.1.2 -Refer to Figure 10.1.2 Above. When the Monopoly Maximizes Profit