Exhibit 9-3 At the profit-maximizing output for the firm in Exhibit 9-3, the single price monopolist will earn a profit of ______ per unit of output?
A)$10
B)$5
C)$4
D)$0
E)-$5

Question

Exhibit 9-3  At the profit-maximizing output for the firm in Exhibit 9-3, the single price monopolist will earn a profit of ______ per unit of output?
A)$10 
B)$5 
C)$4 
D)$0 
E)-$5

Quizplus · Accepted Answer

At the profit-maximizing output, the firm sets marginal revenue (MR) equal to marginal cost (MC). From Exhibit 9-3, at an output of 8 units, the MR is equal to $24 and the MC is equal to $20, so the firm will produce 8 units of output. At this output level, the price charged by the firm is $28. From Exhibit 9-3, the average total cost (ATC) at this output level is $24, so the profit per unit of output is $28 (price) - $24 (ATC) = $4. Therefore, the correct answer is C.

Exhibit 9-3 at the Profit-Maximizing Output for the Firm