Table 17-10
The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost.

-Refer to Table 17-10.If the market for gasoline in Driveaway is a monopoly,then the monopolist's maximum profit is
A) $350.
B) $400.
C) $450.
D) $500.

Question

Table 17-10
The table shows the town of Driveaway's demand schedule for gasoline. Assume the town's gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost.
 
-Refer to Table 17-10.If the market for gasoline in Driveaway is a monopoly,then the monopolist's maximum profit is
A) $350. 
B) $400. 
C) $450. 
D) $500.

Quizplus · Accepted Answer

To find the monopolist's maximum profit, we need to identify the level of output where marginal revenue equals marginal cost. The marginal revenue column can be derived by taking the change in total revenue for each additional gallon sold. The marginal cost column is given as a constant $2 for each gallon.

The monopoly's profit-maximizing level of output is the quantity where marginal revenue equals marginal cost, which is at a quantity of 150 gallons. At this quantity, the price charged by the monopolist is $3 per gallon, which is found by referring to the demand column.

The monopolist's total revenue is therefore:
150 gallons x $3 per gallon = $450

The monopolist's total cost is:
150 gallons x $2 per gallon = $300

The monopolist's maximum profit is:
Total Revenue - Total Cost = $450 - $300 = $150

Therefore, the answer is C) $450.

Table 17-10 the Table Shows the Town of Driveaway's Demand Schedule for Schedule