Table 9.6
$$\begin{array} { | c | c | c | }
\hline \text { Price } ( \$ ) & \text { Quantity } & \text { Total Cost (\$) } \
\hline 16.00 & 0 & 5.00 \
\hline 15.00 & 1 & 7.00 \
\hline 14.00 & 2 & 8.80 \
\hline 13.00 & 3 & 10.40 \
\hline 12.00 & 4 & 12.20 \
\hline 11.00 & 5 & 14.20 \
\hline 10.00 & 6 & 16.40 \
\hline 9.00 & 7 & 18.80 \
\hline 8 & 8 & 21.40 \
\hline 7 & 9 & 24.20 \
\hline
\end{array}$$
-Refer to Table 9.6,which shows the demand schedule faced by a monopolist and the total cost incurred by it in producing each output level.The maximum profit earned by the monopolist is _____
A)$5.00.
B)$40.80.
C)$43.60.
D)$44.20.
E)$42.60.

Question

Table 9.6
 $$\begin{array} { | c | c | c | } 
\hline \text { Price } ( \$ ) & \text { Quantity } & \text { Total Cost (\$) } \
\hline 16.00 & 0 & 5.00 \
\hline 15.00 & 1 & 7.00 \
\hline 14.00 & 2 & 8.80 \
\hline 13.00 & 3 & 10.40 \
\hline 12.00 & 4 & 12.20 \
\hline 11.00 & 5 & 14.20 \
\hline 10.00 & 6 & 16.40 \
\hline 9.00 & 7 & 18.80 \
\hline 8 & 8 & 21.40 \
\hline 7 & 9 & 24.20 \
\hline
\end{array}$$
-Refer to Table 9.6,which shows the demand schedule faced by a monopolist and the total cost incurred by it in producing each output level.The maximum profit earned by the monopolist is _____
A)$5.00.
B)$40.80.
C)$43.60.
D)$44.20.
E)$42.60.

Quizplus · Accepted Answer

To find the maximum profit, we need to find the quantity at which marginal revenue equals marginal cost.

From the demand schedule, we can find the marginal revenue:
$$\begin{array} { | c | c | } 
\hline \text { Quantity } & \text { Marginal Revenue } \
\hline  0 & - \
\hline 1 & -1.00 \
\hline 2 & -2.00 \
\hline 3 & -3.00 \
\hline 4 & -4.00 \
\hline 5 & -5.00 \
\hline 6 & -6.00 \
\hline 7 & -7.00 \
\hline 8 & -8.00 \
\hline 9 & -9.00 \
\hline
\end{array}$$

From the total cost schedule, we can find the marginal cost:
$$\begin{array} { | c | c | } 
\hline \text { Quantity } & \text { Marginal Cost } \
\hline  0 & - \
\hline 1 & 2.00 \
\hline 2 & 1.80 \
\hline 3 & 1.60 \
\hline 4 & 1.80 \
\hline 5 & 2.00 \
\hline 6 & 2.20 \
\hline 7 & 2.40 \
\hline 8 & 2.60 \
\hline 9 & 2.80 \
\hline
\end{array}$$

We can see that the point at which marginal revenue equals marginal cost is when quantity is 4.

Therefore, the monopolist's best choice is to produce and sell a quantity of 4, and the maximum profit earned is:

$$\text{Profit} =( \text{Price}-\text{Average Total Cost})\times \text{Quantity}$$
$$\text{Profit} = (12.00-1.55)\times 4 = 44.20$$

Thus, the answer is D) $44.20.

Table 96 -Refer to Table 9