Figure 8-6 Figure 8-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 8-6.The monopolist earns a profit of

Question

Figure 8-6  Figure 8-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 8-6.The monopolist earns a profit of

Quizplus · Accepted Answer

The monopolist maximizes profit by producing the quantity where marginal revenue equals marginal cost. In this case, that quantity is 4 units, where the demand curve intersects the marginal cost curve. At that quantity, the price is $62, which is the point at which the demand curve intersects the monopolist's average total cost curve. Therefore, each unit sold earns the monopolist a profit of $62 - $18 = $44. Thus, the monopolist's total profit is 4 units times $44 per unit, or $176. However, the monopolist incurs a fixed cost of $72, which must be subtracted from the profit to determine the net profit. Therefore, the monopolist earns a profit of $104 ($176 - $72).

Figure 8-6 Figure 8-6 Shows the Cost and Demand