The following figure shows the demand and cost curves facing a firm with market power in the short run. The firm earns profits of

Question

The following figure shows the demand and cost curves facing a firm with market power in the short run.  The firm earns profits of

Quizplus · Accepted Answer

To find the profit-maximizing quantity, we need to set marginal cost equal to marginal revenue. From the graph, we can see that marginal cost (MC) crosses the marginal revenue (MR) curve at a quantity of 30. Therefore, the profit maximizing quantity is 30. 
The corresponding price can be found on the demand curve, which is $6. Therefore, the profit-maximizing output is 30 units sold at a price of $6 each, for total revenue of $180. 
To find the total cost, we can trace up from the profit-maximizing quantity to the total cost curve, which gives us a total cost of $60. 
Therefore, total profit is: 
$180 (total revenue) - $60 (total cost)= $120. 
So, the firm earns profits of $120.

The Following Figure Shows the Demand and Cost Curves Facing