Use the following to answer question(s): Computing Monopoly Profit

-(Exhibit: Computing Monopoly Profit) The profit-maximizing price is _______ and will generate total economic profit of _______ .
A) P₂; EF
B) P₃; the rectangle P₁P₂FG
C) P₃; the rectangle P₂P₃EF
D) P₂; FG

Question

Use the following to answer question(s): Computing Monopoly Profit
 
-(Exhibit: Computing Monopoly Profit) The profit-maximizing price is _______ and will generate total economic profit of _______ .
A) P₂; EF 
B) P₃; the rectangle P₁P₂FG 
C) P₃; the rectangle P₂P₃EF 
D) P₂; FG

Quizplus · Accepted Answer

The profit-maximizing price is where MR = MC which occurs at point P₃. At this price, the firm can sell Q₃ units and earn a total revenue of P₃Q₃. The total cost of producing Q₃ units is P₂Q₃, which gives a total economic profit of the rectangle P₂P₃EF. Therefore, the correct answer is C.

Use the Following to Answer Question(s): Computing Monopoly Profit