Exhibit 9-9 A monopolist

-In Exhibit 9-9, at the profit-maximizing or loss-minimizing output, the monopolist's total economic profit is:
A) positive.
B) negative.
C) zero.
D) minimum.

Question

Exhibit 9-9 A monopolist
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-In Exhibit 9-9, at the profit-maximizing or loss-minimizing output, the monopolist's total economic profit is:
A) positive. 
B) negative. 
C) zero. 
D) minimum.

Quizplus · Accepted Answer

At the profit-maximizing or loss-minimizing output, the monopolist produces where marginal revenue equals marginal cost. In Exhibit 9-9, this occurs at output level Q2, where the monopolist charges a price of P2. At this output level, the monopolist's total revenue (P2*Q2) is less than its total cost (the shaded area on the graph), resulting in a negative economic profit. Therefore, the correct answer is B, negative.

Exhibit 9-9 a Monopolist