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Figure: Monopoly Model
-(Figure: Monopoly Model) Look at the figure Monopoly Model. When the firm is in equilibrium (that is, maximizing its economic profit), its profit is the area of rectangle:
A) SPDB.
B) IPDH.
C) ISBH.
D) 0PDJ.

Question

Use the following to answer questions:
Figure: Monopoly Model 
-(Figure: Monopoly Model) Look at the figure Monopoly Model. When the firm is in equilibrium (that is, maximizing its economic profit), its profit is the area of rectangle:
A) SPDB. 
B) IPDH. 
C) ISBH. 
D) 0PDJ.

Quizplus · Accepted Answer

In a monopoly model, the profit-maximizing quantity is where marginal cost (MC) equals marginal revenue (MR). The profit is the area between the price (P) and average total cost (ATC) at this quantity, which is represented by the rectangle SPDB.

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