Figure 11-2

For the monopolist show in Figure 11-2, how much profit is the monopolist making per unit?
A)The amount shown as HE
B)The amount shown as GE
C)The amount shown as HF
D)The amount shown as FE

Question

Figure 11-2

For the monopolist show in Figure 11-2, how much profit is the monopolist making per unit?
A)The amount shown as HE 
B)The amount shown as GE 
C)The amount shown as HF 
D)The amount shown as FE

Quizplus · Accepted Answer

The monopolist's profit per unit is equal to the difference between the price and the average total cost (ATC) at the profit-maximizing quantity. In Figure 11-2, the profit-maximizing quantity is where MR = MC, which is Q*. At Q*, the ATC is equal to HF. Therefore, the monopolist's profit per unit is equal to the difference between the price (which is HE at Q*) and ATC (which is HF at Q*), which is equal to HE-HF.

Figure 11-2 For the Monopolist Show in Figure 11-2, How Much Profit