Multiple Choice
If the monopolist's fixed cost is $25, the monopoly's total economic profit when maximizing profit is:
12. Monopoly
Monopoly Efficiency and Deadweight Loss
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If the monopolist's fixed cost is $25, the monopoly's total costs when maximizing profit is:
A
$35
B
$45
C
$85
D
$145
Verified step by step guidance1
Identify the profit-maximizing quantity for the monopolist by finding the point where the marginal cost (MC) curve intersects the marginal revenue (MR) curve. This is the quantity where the monopolist maximizes profit.
Determine the price at which the monopolist sells the product by finding the corresponding point on the demand curve (D) at the profit-maximizing quantity.
Calculate the total revenue (TR) by multiplying the price determined in the previous step by the profit-maximizing quantity.
Calculate the total cost (TC) by adding the fixed cost to the variable cost. The variable cost can be found by multiplying the marginal cost at the profit-maximizing quantity by the quantity itself.
Add the fixed cost of $25 to the variable cost to find the total cost when the monopolist is maximizing profit. Compare this with the given options to verify the correct total cost.
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