What is the monopolist's profit under the following conditions? The profit-maximizing price charged for goods produced is $12

Marketing Jan 12, 2021

What is the monopolist's profit under the following conditions? The profit-maximizing price charged for goods produced is $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.

a. $60

b. $70

c. $100

d. $120

Expert Solution

The right answer option is a. $60.

The profit-maximizing price charged for goods produced is $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. So,

dc / dq = 6 or

Total cost (C) = 6q = 6 * 10 = $60

It is given that the average total cost for 10 units of output is $5. So,

Total profit = Total revenue - Total cost

= 12 * 10 - 60

= 120 - 60

= $60

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