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Scenario: Monopolist
The demand curve for a monopolist is P = 75 -- 0.5Q,and the monopolist's marginal cost curve is defined using the equation MC = 2Q.Assume also that ATC at the profit-maximizing level of production is equal to $12.50.
-(Scenario: Monopolist)Use Scenario: Monopolist.At the profit-maximizing level of output,the profit per unit is:
A) $62.50.
B) $0.00
C) $75.00.
D) $50.00.

Question

Quizplus · Accepted Answer

To find the profit-maximizing level of output, we need to set marginal cost equal to marginal revenue (which is the same as price for a monopolist):
2Q = 75 - 0.5Q
Solving for Q, we get:
Q = 25
Substituting this quantity back into the demand curve gives us the price:
P = 75 - 0.5(25) = 62.5
To find the profit per unit, we need to subtract average total cost from price:
Profit per unit = P - ATC = 62.5 - 12.5 = $50. Therefore, the answer is D.

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