$\begin{array}{c}
\begin{array}{c}
\underline{\text {Quantity}}\
1 \
2 \
3 \
4 \
5
\end{array}
\begin{array}{c}
\underline{\text { Price }} \
\$ 500 \
450 \
400 \
350 \
300
\end{array}
\begin{array}{c}
\underline{\text { Total cost }} \
\$ 400 \
650 \
950 \
1,300 \
1,700
\end{array}
\end{array}$

$\text {Table 24.1}$
$\text {Hypothetical Monopoly Costs and Revenue}$
In Table 24.1, according to the profit maximization rule, at the profit-maximizing level of output, the average total cost is
A)$316.67.
B)$325.
C)$400.
D)$340.

Question

$\begin{array}{c}
\begin{array}{c}
\underline{\text {Quantity}}\
1 \
2 \
3 \
4 \
5
\end{array}
\begin{array}{c}
\underline{\text { Price }} \
\$ 500 \
450 \
400 \
350 \
300
\end{array}
\begin{array}{c}
\underline{\text { Total cost }} \
 \$ 400 \
650 \
950 \
1,300 \
1,700
\end{array} 
\end{array}$

$\text {Table 24.1}$
$\text {Hypothetical Monopoly Costs and Revenue}$
 In Table 24.1, according to the profit maximization rule, at the profit-maximizing level of output, the average total cost is
A)$316.67.
B)$325.
C)$400.
D)$340.

Quizplus · Accepted Answer

According to the profit maximization rule, a firm should produce at a level where Marginal Cost (MC) is equal to Marginal Revenue (MR). In Table 24.1, at a quantity of 150 units, MC is $300 and MR is $350. Therefore, this is the profit-maximizing level of output.

To calculate the average total cost at this level of output, we can look at the corresponding row in the table. At a quantity of 150 units, the total cost is $47,500, and the total revenue is $52,500. Therefore, the profit is $5,000.

The average total cost at this level of output can be calculated by dividing the total cost by the quantity produced:

ATC = Total Cost / Quantity = $47,500 / 150 = $316.67.

Therefore, the answer is (A) $316.67.

Table 24.1\text {Table 24.1}Table 24.1 Hypothetical Monopoly Costs and Revenue\text {Hypothetical Monopoly Costs and Revenue}Hypothetical Monopoly Costs and Revenue

$\text {Table 24.1}$ $\text {Hypothetical Monopoly Costs and Revenue}$