Question

A pure monopolist is producing an output such that ATC=$40, P=$50,MC= $25, and MR=$30. Assuming that the firm is producing 5 units of output, compute the profit realized by the firm.

Answer 1

$215

Step-by-step explanation:

From the question above, we have the following:

Average Total Cost =$40

Price =$50

Marginal Cost = $25

Marginal Revenue =$30

The formula for calculating profit is given as:

Total revenue - total costs.

Total revenue = price X quantity sold

= $50 X 5

Total revenue = $250 + $30

=> $280

Total costs = $40 + $25 = $65

Profit = $280 - $65

Profit = $215