Question

This question is unrelated to the previous two questions. Given the following information, what quantity is profit - maximizing for a Monopolist? Choose the best answer, assuming that the quantity must be a whole number.

Quantity Marginal Revenue Marginal Cost
1 $162 $105
2 $142 $90
3 $122 $80
4 $102 $90
5 $82 $100
6 $62 $110
7 $42 $120

Answer 1

To maximize profit, a monopolist should choose the quantity at which marginal revenue equals marginal cost, and the price at which this quantity intersects the demand curve. By calculating the total revenue and total cost, the monopolist can determine its profit.

Step-by-step explanation:

Step 1: Determine the Profit-Maximizing Quantity

To find the profit-maximizing quantity, we need to compare the marginal revenue (MR) and marginal cost (MC). The monopolist should choose the quantity where MR equals MC. In this case, that occurs at a quantity of 5.

Step 2: Determine the Profit-Maximizing Price

To determine the price, we need to draw a line straight up from the profit-maximizing quantity to the demand curve. In this case, the price would be $800.

Step 3: Calculate Total Revenue, Total Cost, and Profit

Using the profit-maximizing quantity and price, we can calculate the total revenue, total cost, and profit. The total revenue would be $4000, and the total cost would be $1650. Subtracting the total cost from the total revenue gives us a profit of $2350.