Use the following to answer question:
Figure: The Monopolist
-(Scenario: Monopolist)Use Scenario: Monopolist.At the profit-maximizing level of output,the profit per unit is: Scenario: Monopolist
The demand curve for a monopolist is P = 75 - 0.5Q,and the monopolist's marginal cost curve is defined using the equation MC = 2Q.Assume also that ATC at the profit-maximizing level of production is equal to $12.50.
A)$62.50.
B)$0.00
C)$75.00.
D)$50.00.

Question

Use the following to answer question:
Figure: The Monopolist 
-(Scenario: Monopolist)Use Scenario: Monopolist.At the profit-maximizing level of output,the profit per unit is: Scenario: Monopolist
The demand curve for a monopolist is P = 75 - 0.5Q,and the monopolist's marginal cost curve is defined using the equation MC = 2Q.Assume also that ATC at the profit-maximizing level of production is equal to $12.50.
A)$62.50. 
B)$0.00 
C)$75.00. 
D)$50.00.

Quizplus · Accepted Answer

To find the profit-maximizing level of output, we need to first set marginal cost equal to marginal revenue (which is equal to price for a monopolist):
MC = MR = P
2Q = 75 - 0.5Q
2.5Q = 75
Q = 30

So, the profit-maximizing level of output is 30 units. To find the price at this level of output, we can plug Q = 30 into the demand equation:
P = 75 - 0.5Q
P = 75 - 0.5(30)
P = 60

Therefore, the price at the profit-maximizing level of output is $60. To find the profit per unit, we need to subtract ATC ($12.50) from the price:
Profit per unit = $60 - $12.50 = $47.50

Therefore, the correct answer is D.

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