1. The following graph has been provided for a monopolist.

Use the above information to complete exercises 2.1. - 2.4.
1.1. Determine the monopolist's profit maximising price and quantity. Calculate the profit/loss at this price and quantity.

Question

1. The following graph has been provided for a monopolist.

Use the above information to complete exercises 2.1. - 2.4.
1.1. Determine the monopolist's profit maximising price and quantity. Calculate the profit/loss at this price and quantity.

Accepted Answer

∻Solution∻ ‖ a ⋮ Identify the profit-maximizing quantity: The monopolist maximizes profit where $MR = MC$. From the graph, this occurs at the point where the MR and MC curves intersect. This intersection happens at an output level of approximately 300 units. ‖ ‖ b ⋮ Determine the profit-maximizing price: To find the price, we look at the demand curve (AR) at the profit-maximizing quantity. At 300 units, the price on the AR curve is approximately $2.00. ‖ ‖ c ⋮ Calculate total revenue: Total revenue (TR) is calculated as $P imes Q$. At the profit-maximizing quantity and price, $TR = 2.00 imes 300 = 600$. ‖ ‖ d ⋮ Calculate total cost: Total cost (TC) is calculated as $ATC imes Q$. From the graph, the ATC at 300 units is approximately $1.25$. Therefore, $TC = 1.25 imes 300 = 375$. ‖ ‖ e ⋮ Calculate profit: Profit is calculated as $TR - TC$. Therefore, profit = $600 - 375 = 225$. ‖ ∻Answer∻ ⚹ The monopolist's profit-maximizing price is $2.00, and the profit-maximizing quantity is 300 units. The profit at this price and quantity is $225. ⚹ ∻Key Concept∻ ⚹ Profit maximization for a monopolist occurs where marginal revenue equals marginal cost. ⚹ ∻Explanation∻ ⚹ By identifying the intersection of the MR and MC curves, we determine the profit-maximizing quantity. The corresponding price on the demand curve (AR) gives us the profit-maximizing price. Total revenue and total cost calculations allow us to find the profit. ⚹◊What is the monopolist's profit-maximizing output level given the information provided?⍭ Generate me a similar question◊

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