Figure 11-6 At its optimal output level, the profit-maximizing monopolist in Figure 11-6 has total costs equal to A)zero. B)P₂ × Q₂. C)P₃ × Q₂. D)P₄ × Q₃.

Question

Quizplus · Accepted Answer

At its optimal output level, the profit-maximizing monopolist produces where marginal revenue (MR) equals marginal cost (MC), and sets price (P) based on the demand curve. In Figure 11-6, this occurs at point E where MR = MC and price is set at P1. Total costs at this output level are equal to P₃ * Q₂, which is the rectangle bounded by the average total cost (ATC) curve and the quantity axis from 0 to Q₂. Thus, the correct answer is (C).

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