The unregulated monopoly in the figure below will earn profit of:
A) $16.
B) $8.
C) $4.
D) $0.

Question

Quizplus · Accepted Answer

The profit-maximizing output for a monopolist is where marginal revenue (MR) equals marginal cost (MC). In the graph, it is shown that the marginal cost of producing the 6th unit is $4, and the marginal revenue at 6 units is $20. Thus, the monopolist will produce 6 units and charge a price of $20. 
Total revenue will be 6 x $20 = $120.
Total cost will be 6 x $4 = $24.
Therefore, profit will be $120 - $24 = $96.
However, the monopolist has to pay $80 in rent, which leaves a profit of $16.

The Unregulated Monopoly in the Figure Below Will Earn Profit