Table 15-8
The following table provides information on the price, quantity, and average total cost for a monopoly.
-Refer to Table 15-8. What is the maximum profit that the monopolist can earn?
A)$10
B)$20
C)$30
D)$40

Question

Table 15-8
The following table provides information on the price, quantity, and average total cost for a monopoly. 
-Refer to Table 15-8. What is the maximum profit that the monopolist can earn?
A)$10 
B)$20 
C)$30 
D)$40

Quizplus · Accepted Answer

The monopolist's profit is maximized where marginal revenue equals marginal cost. From the table, we can see that at a quantity of 4, the marginal revenue is $20 and the marginal cost is $10. Therefore, the monopolist should produce and sell 4 units, earning a maximum profit of ($20 - $10) x 4 = $40. However, since the fixed cost of $20 must be subtracted from the total profit, the actual maximum profit is $40 - $20 = $20.

Table 15-8 the Following Table Provides Information on the Price, Quantity, and Quantity