The figure below shows the revenue and cost curves for a profit-maximizing monopolist. Based on the figure, the region bounded by FAGB represents _____.FIGURE 8-2
A)total costs.
B)total losses.
C)total profits.
D)total consumer surplus.
E)total producer's surplus.

Question

The figure below shows the revenue and cost curves for a profit-maximizing monopolist. Based on the figure, the region bounded by FAGB represents _____.FIGURE 8-2 
A)total costs. 
B)total losses. 
C)total profits. 
D)total consumer surplus. 
E)total producer's surplus.

Quizplus · Accepted Answer

The region bounded by FAGB represents total profits for the monopolist, as it represents the area between the demand curve and the average total cost curve, which indicates the monopolist's total revenue and total cost. The monopolist maximizes profits by producing at the quantity where marginal revenue (MR) equals marginal cost (MC), which is Q*. At Q*, the monopolist charges the price of P*, which is higher than the marginal cost of production, resulting in a markup and positive economic profit. Thus, the region bounded by FAGB represents the total profits earned by the monopolist at the profit-maximizing quantity Q*.

The Figure Below Shows the Revenue and Cost Curves for a Profit-Maximizing