The price charged by a monopolistic competitor for each unit of a good is $7.If it produces 5,000 units of the good at a total cost of $25,000,what is its profit?

Question

Quizplus · Accepted Answer

To calculate profit, we need to first determine the total revenue:

Total revenue = Price x Quantity = $7 x 5,000 = $35,000

Next, we need to calculate the total cost: 
Total cost = Fixed cost + Variable cost 
Given only one cost total is given, we can assume that this $25,000 total cost is the sum of both fixed and variable costs.

Total cost = Fixed cost + Variable cost = $25,000

Profit = Total revenue - Total cost = $35,000 - $25,000 = $10,000

Therefore, the answer is choice B, $10,000.

The Price Charged by a Monopolistic Competitor for Each Unit