Table 8-1
A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 8-1.
-Refer to Table 8-1.What is the amount of the firm's profit?

Question

Table 8-1
  A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 8-1.
-Refer to Table 8-1.What is the amount of the firm's profit?

Quizplus · Accepted Answer

The best choice for the firm is to produce 20 units of software, where MR=MC. At this level of output, the firm's profit-maximizing price is $35 per unit, and the total profit is ($35 - $15) x 20= $400 - $200 = $200. However, the firm incurs a fixed cost of $150, so the total profit is $200 - $150 = $50. Therefore, the amount of the firm's profit is $50, which corresponds to option B.

Table 8-1 a Monopoly Producer of Foreign Language Translation Software