The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of the output. Table 10.3

- Assume that the firm described in Table 10.3 is incurring a total cost of $7,000 at the profit-maximizing output level.The firm will
A)lose $10,000 in the short run.
B)break even.
C)earn a profit of $3,800.
D)earn a profit of $3,500.
E)earn a profit of $5,500.

Question

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of the output. Table 10.3

- Assume that the firm described in Table 10.3 is incurring a total cost of $7,000 at the profit-maximizing output level.The firm will
A)lose $10,000 in the short run. 
B)break even. 
C)earn a profit of $3,800. 
D)earn a profit of $3,500. 
E)earn a profit of $5,500.

Quizplus · Accepted Answer

To find the profit-maximizing output level, we need to look for the quantity at which marginal revenue (MR) equals marginal cost (MC). From the table, we can see that MR is not constant and decreases with an increase in output level. However, for simplicity, we can assume that the marginal revenue decreases by $1 for every additional unit of output. Thus, we can calculate the approximate MR as:
Q	MR
1	31
2	30
3	29
4	28
5	27

The point at which MR = MC is at Q = 3 units, where both are equal to $29. At this output level, the price charged by the monopolist is $35. Therefore, the total revenue earned is $105. The total cost incurred is $7,000. Thus, the profit earned by the firm is $98 = $105 - $7. This corresponds to the option C.

The Table Given Below Shows the Prices Charged and Marginal