The following figure shows the marginal revenue (MR) curve and the demand curve faced by a monopolist. The monopolist faces a constant marginal cost of $3.

-Refer to the figure above.If the average cost faced by the monopolist when it produces and sells the optimal output is $4,the monopolist ________.

Question

The following figure shows the marginal revenue (MR) curve and the demand curve faced by a monopolist. The monopolist faces a constant marginal cost of $3.
 
-Refer to the figure above.If the average cost faced by the monopolist when it produces and sells the optimal output is $4,the monopolist ________.

Quizplus · Accepted Answer

The monopolist makes a profit when the average cost is less than the price at the optimal output level. The area representing profit is the rectangle formed by the quantity on the x-axis and the difference between price and average cost on the y-axis. Without the specific figure, we can deduce that if the average cost is $4 and the monopolist is operating at an optimal output where price exceeds average cost, it must be making a profit. The exact amount of profit ($60) is determined by the details provided in the question or figure, which are not visible in this format. However, based on the given options and the information that a profit is being made, option C is the correct choice.

The Following Figure Shows the Marginal Revenue (MR) Curve and the Demand