Question

A profit-maximizing monopolist charges a price of $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. Average total cost for 10 units of output is $5. What is the monopolist's profit?a. $70b. $100c. $120d. $60

Answer 1

The correct answer is option a.

Step-by-step explanation:

The price is $12.

At this price, the quantity sold is 10 units.

The average total cost is $5.

The total cost will be

=
`ATC\ *\ Quantity`

=
`\$ 5\ *\ 10\ units`

= $50

The total revenue will be

=
`Price\ *\ Quantity`

=
`\$ 12\ *\ 10\ units`

= $120

The profit will be

= Total revenue - Total cost

= $120 - $50

= $70