Table 14-8
The following table provides information on the price,quantity,and average total cost for a monopoly.

-Refer to Table 14-8.What is the maximum profit that the monopolist can earn?
A) $10
B) $20
C) $30
D) $40

Question

Table 14-8
The following table provides information on the price,quantity,and average total cost for a monopoly.
 
-Refer to Table 14-8.What is the maximum profit that the monopolist can earn?
A) $10 
B) $20 
C) $30 
D) $40

Quizplus · Accepted Answer

The maximum profit occurs where marginal revenue equals marginal cost. At a quantity of 4, the marginal cost equals the price of $16. At this quantity, the monopolist earns a profit of $20 (total revenue of $64 minus total cost of $44). At any other quantity, the marginal cost either exceeds the price or is less than the price, resulting in a lower profit. Therefore, the best choice is to produce and sell 4 units at a price of $16, earning a maximum profit of $20.

Table 14-8 The Following Table Provides Information on the Price,quantity,and Average Total