Final answer:
The monopolistic competitor earns a profit of $2 per unit by subtracting the average cost $(16) from the selling price $(18). With 150 units produced, the total profit amounts to $300.
Step-by-step explanation:
A monopolistic competitor maximizes profits by producing a quantity where marginal cost equals marginal revenue. In the given scenario, the monopolistic competitor produces 150 units, with a marginal cost of $8, an average cost of $16 per unit, and sells the output at a price of $18 per unit. To calculate the profit per unit, we subtract the average cost from the selling price.
The profit per unit is calculated as follows:
Profit per unit = Selling price - Average cost
Profit per unit = $18 - $16
Profit per unit = $2
Therefore, the firm earns a profit of $2 per unit. To find the total profit, multiply the profit per unit by the quantity produced:
Total profit = Profit per unit × Quantity
Total profit = $2 × 150
Total profit = $300