Exhibit 9.12

-Refer to Exhibit 9.12,which shows the cost and revenue curves faced by a profit-maximizing monopolist.The monopolist earns economic profit equal to the area _____

Question

Exhibit 9.12

-Refer to Exhibit 9.12,which shows the cost and revenue curves faced by a profit-maximizing monopolist.The monopolist earns economic profit equal to the area _____

Quizplus · Accepted Answer

The economic profit earned by a monopolist is equal to the difference between total revenue (TR) and total cost (TC). In this case, the monopolist's profit-maximizing output level is where marginal revenue (MR) equals marginal cost (MC), which occurs at point P. The monopolist charges a price of P', which is found on the demand curve at point D. The monopolist's total revenue is the rectangle defined by P'ABC. 
The monopolist's total cost is the rectangle defined by P'BD. Therefore, the economic profit earned by the monopolist is the area of rectangle ABDP', which is equal to option D (pbdp').

Exhibit 9.12 -Refer to Exhibit 9.12,which Shows the Cost and Revenue Curves