The graph above shows the demand and cost conditions facing a monopolist.What is the maximum profit the monopolist can earn?

Question

Quizplus · Accepted Answer

The monopolist will produce where MR=MC, which occurs at Q=4. At this output level, the price will be $900 and the total cost will be $100. Therefore, the monopolist's profit will be ($900- $100) x 4 = $3,200. However, this includes the fixed cost of $2,400, so the maximum profit the monopolist can earn is $3,200 - $2,400 = $800.

The Graph Above Shows the Demand and Cost Conditions Facing