The following graph gives cost and revenue data for a monopolist:

-Refer to the above graph to answer this question.If the monopolist is regulated and forced to charge the socially optimum price,what will be its resulting total revenue?
A)$700.
B)$2,400.
C)$2,750.
D)$3,000.
E)$3,150.

Question

The following graph gives cost and revenue data for a monopolist:
 
-Refer to the above graph to answer this question.If the monopolist is regulated and forced to charge the socially optimum price,what will be its resulting total revenue?
A)$700. 
B)$2,400. 
C)$2,750. 
D)$3,000. 
E)$3,150.

Quizplus · Accepted Answer

At the socially optimum price, the monopolist will produce the quantity where the marginal cost equals the marginal revenue, which is at Q = 35. At this quantity, the price will be P = $55. The total revenue at this price and quantity is $55*35 = $1,925. However, since the firm is producing at its minimum efficient scale (MES), it will incur a total cost of $825, resulting in a total profit of $1,100. Therefore, the resulting total revenue for the monopolist at the socially optimum price is $2,750.

The Following Graph Gives Cost and Revenue Data for a Monopolist