The following table shows some costs and prices faced by an airplane manufacturer.
Table 7.1-Monopoly costs and revenue
-In Table 7.1,the maximum profit that can be achieved is:
A) $7 million per month.
B) $10 million per month.
C) $11 million per month.
D) $21 million per month.

Question

The following table shows some costs and prices faced by an airplane manufacturer.
Table 7.1-Monopoly costs and revenue 
-In Table 7.1,the maximum profit that can be achieved is:
A) $7 million per month. 
B) $10 million per month. 
C) $11 million per month. 
D) $21 million per month.

Quizplus · Accepted Answer

To find the maximum profit, we need to find the quantity that maximizes the difference between total revenue and total cost. This occurs when marginal revenue is equal to marginal cost. Looking at the table, we see that the quantity at which MR=MC is 6 million units. At this quantity, the price charged will be $3,000, and the total revenue will be 6 million x $3,000 = $18 billion. The total cost at this quantity will be $7 billion, which gives a profit of $11 billion per month. Therefore, the maximum profit that can be achieved is $11 million per month, which corresponds to choice C.

The Following Table Shows Some Costs and Prices Faced by an Airplane