Which of the following formulas would correctly calculate a monopolist's profit?
A)profit = price - marginal cost
B)profit = price - average total cost
C)profit = (price - marginal cost) × quantity
D)profit = (price - average total cost) × quantity

Question

Quizplus · Accepted Answer

The correct formula for calculating a monopolist's profit is (price - average total cost) × quantity, because it takes into account both the revenue from selling the product at the monopolist's chosen price and the cost of producing that product. Option A only considers the marginal cost, which is not enough to accurately determine profit. Option B only considers the average total cost, which does not take into account the revenue from selling the product. Option C multiplies the price by the quantity but does not take into account the cost of production.

Which of the Following Formulas Would Correctly Calculate a Monopolist's