(Figure: The Monopolist) Use Figure: The Monopolist.At the profit-maximizing level,this monopolist will:

A) incur a loss equal to the area (P₁ - P₄) Q₁.
B) earn a profit equal to the area (P₂ - P₄) Q₂.
C) earn a profit equal to the area (P₂ - P₃) Q₂.
D) break even.

Question

Anthony Fryer · Accepted Answer

Final Answer : C, Explanation :  At the profit-maximizing level, the monopolist will produce where marginal revenue (MR) equals marginal cost (MC), which is at output level Q12. The price charged for that output level is P12. The total cost at Q12 is TC12. Therefore, the profit earned by the monopolist is (P12-ATC12) multiplied by Q12, which is equal to the area (P 2  - P 3 ) multiplied by Q12. Hence, the monopolist will earn a profit equal to that area.

(Figure: The Monopolist) Use Figure: The Monopolist.At the profit-maximizing level,this monopolist will:

A) incur a loss equal to the area (P₁ - P₄) Q₁.
B) earn a profit equal to the area (P₂ - P₄) Q₂.
C) earn a profit equal to the area (P₂ - P₃) Q₂.
D) break even.

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Learning Objectives

Related questions

(Figure: The Monopolist) Use Figure: The Monopolist.At the profit-maximizing level,this monopolist will:A) incur a loss equal to the area (P1 - P4) Q1.B) earn a profit equal to the area (P2 - P4) Q2.C) earn a profit equal to the area (P2 - P3) Q2.D) break even.

Definitions

Learning Objectives

Learning Objectives

Related questions

(Figure: The Monopolist) Use Figure: The Monopolist.At the profit-maximizing level,this monopolist will:

A) incur a loss equal to the area (P₁ - P₄) Q₁.
B) earn a profit equal to the area (P₂ - P₄) Q₂.
C) earn a profit equal to the area (P₂ - P₃) Q₂.
D) break even.