Question

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist

Answer 1

The monopolist is currently maximizing its profits at a total profit of $250.

Step-by-step explanation:

Monopolist is a market where there is only one producer or seller.

A monopolist maximizes at a point where marginal cost (MC) equals marginal revenue (MR), i.e. where MR = MC.

This condition is satisfied by the monopolist in the question because its MR = MC = 4.

The profit per unit of a monopolist can obtained by deducting the average total cost (AC) from the average variable cost (AR) as follows:

Profit per unit = $8 - $3 = $5.

While the total profit is quantity produced multiply profit per unit as follows:

Total profit = 50 × $5 = $250.

Therefore, the monopolist is currently maximizing its profits at a total profit of $250.