Figure 15-4

-Refer to Figure 15-4.A profit-maximizing monopoly's profit is equal to
A) P4 x Q3.
B) (P4-P2) x Q3.
C) (P4-P1) x Q3.
D) (P5-P0) x Q1.

Question

Figure 15-4
 
-Refer to Figure 15-4.A profit-maximizing monopoly's profit is equal to
A) P4 x Q3. 
B) (P4-P2) x Q3. 
C) (P4-P1) x Q3. 
D) (P5-P0) x Q1.

Quizplus · Accepted Answer

A profit-maximizing monopoly produces where marginal revenue equals marginal cost, which is at Q3. The price that corresponds to Q3 is P1. Therefore, the monopoly's profit is the difference between its total revenue (P1 x Q3) and its total cost (which is represented by the area beneath the marginal cost curve up to Q3). Therefore, the monopoly's profit is (P4-P1) x Q3.

Figure 15-4 -Refer to Figure 15-4.A Profit-Maximizing Monopoly's Profit Is Equal to Profit