What is the monopolist's profit under the following conditions? The profit-maximizing price of...
Question:
What is the monopolist's profit under the following conditions? The profit-maximizing price of charged goods produced is $12. The intersection of the marginal revenue and marginal cost curves occurs w output is 10 units, marginal cost is $8, and the average total cost is $7.
a. Not enough information is given to determine the answer,
b. $10,
c. $40,
d. $50.
Monopoly:
A market structure shows the list of characteristics of a certain market. One type of market structure is called a monopoly. A monopoly is a highly regulated market and it trades where there are only one seller.
Answer and Explanation: 1
- The correct answer is Option D.
A monopolist will operate at maximum profit. Profit is maximized when the number of outputs produced occurs where the marginal revenue and marginal cost intersects. Based on the problem, the price is $12, the number of outputs produced is 10 units and the average total cost is $7. Let us compute the profit. The formula to determine the monopolist's profit is:
{eq}Profit = (Price - Average\:total\:cost) \times Quantity \\ Profit = (12 - 7) \times 10 \\ Profit = 50 {/eq}
The monopolist's profit is $50.
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What is a Monopoly in Economics? - Definition & Impact on Consumers
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Chapter 7 / Lesson 2
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Understand the meaning of a monopoly in economics and what it does. Also, know the characteristics of a monopoly and the different types of monopolies.
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