Figure: Paint Market What is the profit or loss for this monopoly?

Name: Figure: Paint Market What is the profit or loss for this monopoly?
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Question

Figure: Paint Market  What is the profit or loss for this monopoly?

Quizplus · Accepted Answer

The profit for a monopoly is equal to (Price - Average Total Cost) x Quantity. In this case, the profit-maximizing output is where MR = MC, which is at a quantity of 5000 gallons and a price of $30 per gallon. At this output, the ATC is $20 per gallon, so the profit is (30-20) x 5000 = $100,000. Therefore, the correct answer is C.

Figure: Paint Market What Is the Profit or Loss