Table 14-16
A monopolist faces the following demand curve:

-Refer to Table 14-16.The monopolist has total fixed costs of $40 and a constant marginal cost of $5.At the profit-maximizing level of output,the monopolist's average total cost is
A) $9.00.
B) $7.50.
C) $6.74.
D) $5.82.

Question

Table 14-16
A monopolist faces the following demand curve:
 
-Refer to Table 14-16.The monopolist has total fixed costs of $40 and a constant marginal cost of $5.At the profit-maximizing level of output,the monopolist's average total cost is
A) $9.00. 
B) $7.50. 
C) $6.74. 
D) $5.82.

Quizplus · Accepted Answer

The monopolist's average total cost (ATC) is calculated by adding total fixed costs and total variable costs, then dividing by the quantity. At the profit-maximizing level of output, the monopolist sets marginal cost (MC) equal to marginal revenue (MR). Given the constant MC of $5 and fixed costs of $40, the ATC at the profit-maximizing output is $7.50.

Table 14-16 A Monopolist Faces the Following Demand Curve