Table 15-1
A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 15-1.
-Refer to Table 15-1. What is the amount of the firm's profit?
A) $335
B) $350
C) $880
D) $910

Question

Table 15-1
  A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 15-1.
-Refer to Table 15-1. What is the amount of the firm's profit?
A) $335 
B) $350 
C) $880 
D) $910

Quizplus · Accepted Answer

To maximize profit, the firm should produce the quantity at which marginal revenue (MR) equals marginal cost (MC). At a quantity of 5 units, MR = $70 and MC = $50, so the profit-maximizing quantity is 5 units. At this quantity, the price per unit is $70, so total revenue is 5 x $70 = $350. Total cost at this quantity is $210, so the firm's profit is $350 - $210 = $140. However, we must also subtract the fixed cost of $10 per unit, which is $50 in total, so the final profit is $140 - $50 = $90. Therefore, the correct answer is B) $350.

Table 15-1 a Monopoly Producer of Foreign Language Translation Software