Suppose that a monopoly firm is operating at its profit-maximizing point. The profit-maximizing price is $12, and the profit-maximizing quantity is 100 units. If the total profit of the monopolist is $400, then the average total cost of production is _____, and the profit per unit is:

Question

Quizplus · Accepted Answer

The total revenue of the monopolist is price times quantity, which is $12 * 100 = $1200. The total profit is given as $400, which means the total cost is $1200 - $400 = $800. The average total cost is the total cost divided by the quantity, which is $800 / 100 = $8. The profit per unit is the difference between the price and the average total cost, which is $12 - $8 = $4.

Suppose That a Monopoly Firm Is Operating at Its Profit-Maximizing