Table 15-12
The following table provides information on the price, quantity, and average total cost for a monopoly.

-Refer to Table 15-12. If the firm produces the profit-maximizing level of output, it will earn profits of
A) $18.
B) $24.
C) $15.
D) $12.

Question

Table 15-12
The following table provides information on the price, quantity, and average total cost for a monopoly.
 
-Refer to Table 15-12. If the firm produces the profit-maximizing level of output, it will earn profits of
A) $18. 
B) $24. 
C) $15. 
D) $12.

Quizplus · Accepted Answer

The profit-maximizing level of output occurs where marginal revenue equals marginal cost, which is at a quantity of 4. At this level of output, the price is $20 and the average total cost is $16, resulting in a profit per unit of $4. Therefore, the total profit earned is the profit per unit multiplied by the quantity, which is $4 x 4 = $16. However, the table also shows a fixed cost of $8, which must be subtracted from the total profit to get the actual profits earned, which is $16 - $8 = $8.

Table 15-12 the Following Table Provides Information on the Price, Quantity, and Quantity