In Figure 24.2,total profit at the profit-maximizing rate of output is
A)$16.00.
B)$5.50.
C)$6.00.
D)$22.00.

Question

In Figure 24.2,total profit at the profit-maximizing rate of output is
A)$16.00. 
B)$5.50. 
C)$6.00. 
D)$22.00.

Quizplus · Accepted Answer

At the profit-maximizing rate of output, the marginal revenue (MR) equals the marginal cost (MC). From the graph, we can see that this occurs at a quantity of 6. At this quantity, the price is $10 and the average total cost (ATC) is $4, so the profit per unit is $6. Therefore, total profit at a quantity of 6 is:

Profit = (Price - ATC) x Quantity
Profit = ($10 - $4) x 6
Profit = $36

However, the fixed cost of $30 must also be considered. Subtracting this from the profit gives us a total profit of $6. Therefore, the correct answer is C) $6.00.