Refer to the following table that gives the demand facing a monopolist: $$\begin{array} { c c }
\text { Price } & \text { Quartity } \
\hline \$ 20 & 20 \
15 & 40 \
10 & 65 \
5 & 70
\end{array}$$ If a firm earns profits of $250 by producing 40 units of output,the firm charges a price of _____ and has total costs of ______.

Question

Refer to the following table that gives the demand facing a monopolist: $$\begin{array} { c c } 
\text { Price } & \text { Quartity } \
\hline \$ 20 & 20 \
15 & 40 \
10 & 65 \
5 & 70
\end{array}$$ If a firm earns profits of $250 by producing 40 units of output,the firm charges a price of _____ and has total costs of ______.

Quizplus · Accepted Answer

Since the monopolist is earning a profit of $250 from producing 40 units, we can assume that its marginal cost (MC) at that quantity is less than $15 (otherwise, it wouldn't be earning a profit). 
To maximize profits, the monopolist should produce at the quantity where MR=MC. Using the table, we can see that if the monopolist produces 65 units (where price is $10), it can sell at a price of $15 (where quantity demanded is 40) and earn a profit of $350 ($15 * 40 - MC * 65 = $350). Therefore, the answer is (B): the monopolist charges a price of $15 and has total costs of $350.

Refer to the Following Table That Gives the Demand Facing Price Quartity $202015401065570\begin{array} { c c } \text { Price } & \text { Quartity } \\\hline \$ 20 & 20 \\15 & 40 \\10 & 65 \\5 & 70\end{array} Price $2015105​ Quartity 20406570​​

Refer to the Following Table That Gives the Demand Facing $\begin{array} { c c } \text { Price } & \text { Quartity } \\\hline \$ 20 & 20 \\15 & 40 \\10 & 65 \\5 & 70\end{array}$