A monopolist faces an average total cost of $10 when it produces 400 units of its product.If it sells the 400 units at $6 per unit,the monopolist ________.
A) makes a profit of $600
B) incurs a loss of $600
C) makes a profit of $1,600
D) incurs a loss of $1,600

Question

Quizplus · Accepted Answer

The monopolist incurs an average total cost of $10 to produce each unit, meaning that the total cost of producing 400 units is 400 x $10 = $4,000. 
If the monopolist sells the 400 units at $6 per unit, its total revenue is 400 x $6 = $2,400. 
Since the total cost of production ($4,000) is greater than the total revenue from selling the product ($2,400), the monopolist incurs a loss of $1,600 (option D).

A Monopolist Faces an Average Total Cost of $10 When