-A monopolist is maximizing profit at an output rate of 100 units per week. At this output rate, the price that its customers are willing and able to pay is $8 per unit, average total cost is $5 per unit, and marginal cost is $6 per unit. It may be concluded that at this monthly output rate, marginal revenue is
A) $5 per unit, and the monopolist earns zero economic profits.
B) $6 per unit, and the monopolist earns economic profits of $200 per week.
C) $6 per unit, and the monopolist earns economic losses of $100 per week.
D) $6 per unit, and the monopolist earns economic profits of $300 per week.

Question

-A monopolist is maximizing profit at an output rate of 100 units per week. At this output rate, the price that its customers are willing and able to pay is $8 per unit, average total cost is $5 per unit, and marginal cost is $6 per unit. It may be concluded that at this monthly output rate, marginal revenue is
A) $5 per unit, and the monopolist earns zero economic profits. 
B) $6 per unit, and the monopolist earns economic profits of $200 per week. 
C) $6 per unit, and the monopolist earns economic losses of $100 per week. 
D) $6 per unit, and the monopolist earns economic profits of $300 per week.

Quizplus · Accepted Answer

Marginal revenue is equal to marginal cost at the profit-maximizing output rate. In this case, marginal cost is $6 per unit, so marginal revenue must also be $6 per unit. The monopolist's profit is equal to total revenue minus total cost. Total revenue is equal to price times quantity, which is $8 per unit times 100 units, or $800. Total cost is equal to average total cost times quantity, which is $5 per unit times 100 units, or $500. Therefore, the monopolist's profit is $800 - $500 = $300.

-A Monopolist Is Maximizing Profit at an Output Rate of 100