The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output.The firm does not incur a fixed cost of production. Table 10.4
Refer to Table 10.4 and calculate the total revenue earned by the monopolist at the profit maximizing level of output.
A)$60.
B)$16.
C)$52.
D)$42.
E)$30.

Question

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output.The firm does not incur a fixed cost of production. Table 10.4
 Refer to Table 10.4 and calculate the total revenue earned by the monopolist at the profit maximizing level of output.
A)$60. 
B)$16. 
C)$52. 
D)$42. 
E)$30.

Quizplus · Accepted Answer

To determine the profit maximizing level of output, we should look for where Marginal Revenue(MR) = Marginal Cost(MC). In the table, we can see that at an output level of 5 units, MR = MC = $8. At this level, the price charged by the monopolist is $10. Therefore, the total revenue earned by the monopolist at the profit maximizing level of output is:
Total revenue = Price x Quantity = $10 x 5 units = $50
However, we should also take into account the revenue earned from any previously sold units, which equals the price of those units. From the table, we can see that the monopolist sold 2 units at the price of $8 each, so the additional revenue earned is 2 x $8 = $16. Therefore, the total revenue earned by the monopolist at the profit maximizing level of output is $50 + $16 = $66.
Therefore, the best choice is C ($52), as it is the closest to our calculated value of $66.

The Table Given Below Shows the Price, Marginal Revenue and Marginal