Figure 11-6 -At its optimal output level, the profit-maximizing monopolist in Figure 11-6 will earn a profit equal to A)zero. B)(P₂ − P₃)Q. C)P Q. D)(P5 − P6 )Q.

Question

Figure 11-6 -At its optimal output level, the profit-maximizing monopolist in Figure 11-6 will earn a profit equal to A)zero. B)(P₂ − P₃)Q. C)P > Q. D)(P5 − P6 )Q.

Quizplus · Accepted Answer

The profit-maximizing monopolist will produce where marginal revenue (MR) equals marginal cost (MC), which occurs at output level Q. At this output level, the monopolist will charge a price of P1. The profit earned will be equal to (P1 - ATC) multiplied by the quantity Q, which can be expressed as (P₂ - P₃)Q. This is the answer choice B.

Figure 11-6 -At Its Optimal Output Level, the Profit-Maximizing Monopolist in Figure