11(14/2017 01:00 PM 79.6/100 11/12/2017 04:15 PM Gradebook Print 1] Calculator 1

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11(14/2017 01:00 PM 79.6/100 11/12/2017 04:15 PM Gradebook Print 1] Calculator 12 of 1 Sapling Learning Map Nope ont éldo Elecrii ohelecri power to the cily of Go Luciky. 101 At the profit maximizing point, what is Happy Go Lucky's level of profit? MC O $30 O $150 O $90 ATC $30 Incorrect. A monopolist maximizes profit b producing a quantity which results in marginal revenue equaling marginal cost and charging a price according to its demand curve. MR 0 5 10 15 20 25 30 35 40 45 50 50 Quantity O Previous Give Up & View Solution # Try Again O Next Exit

Explanation / Answer

Monopolist is a price taker. He will determine the quantity of output that will maximize revenue. The monopolist faces a downward sloping demand curve because he can sell more if he lowers the price. The profit maximizing price and output is where marginal revenue equals marginal cost, then it is extended to the market demand curve to determine what market price corresponds to that quantity.

The monopoly profit equals (P-ATC)xQ.

The profit maximization price is $5 where MC=MR and extended up to the demand curve and profit maximization quantity is 30. ATC = $4 when quantity is 30.

Profit - ($5-$4) x 30= $30.

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