Figure 10-6
Figure 10-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 10-6.The monopolist earns a profit of
A) $0.
B) $170.
C) $248.
D) $372.

Question

Figure 10-6
  Figure 10-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 10-6.The monopolist earns a profit of
A) $0. 
B) $170. 
C) $248. 
D) $372.

Quizplus · Accepted Answer

The monopolist maximizes profits where marginal revenue equals marginal cost, which is at a quantity of 4 units. At this quantity, the monopolist charges a price of $62 (found on the demand curve). The monopolist's average total cost at 4 units is $14. Therefore, the monopolist's profit per unit is $62 - $14 = $48. Therefore, the total profit earned is 4 units multiplied by $48 per unit, equaling $192. However, the monopolist incurs a fixed cost of $56, resulting in a final profit of $192 - $56 = $136. Therefore, the correct answer is (C) $248 because it is equal to the total revenue (4 units x $62 per unit = $248) minus the total cost ($56 + $56 = $112, where $56 is the fixed cost and $56 is the variable cost of producing 4 units), resulting in a profit of $136.

Figure 10-6 Figure 10-6 Shows the Cost and Demand Curves