Figure 16-5The following graph depicts the market situation for a monopoly pastry shop called Bearclaws.Refer to Figure 16-5.Given that Bearclaws chooses the profit-maximizing price and quantity, what profit level will it obtain?

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Figure 16-5The following graph depicts the market situation for a monopoly pastry shop called Bearclaws.​Refer to Figure 16-5.Given that Bearclaws chooses the profit-maximizing price and quantity, what profit level will it obtain?

BlackTom AI · Accepted Answer

We start by restating what the question asks and the information it relies on: Bearclaws is a monopoly selecting the profit-maximizing price and quantity based on the given Figure 16-5, and we are to determine the resulting profit level.
Option analysis helps us understand why each choice would or would not be correct when we read the graph.
Option a. $280: This would imply a relatively small positive profit. To conclude this from the graph, the intersection of MR and MC (the profit-maximizing quantity) would need to yield a price and cost combination where (P − ATC) × Q = 280. If the graph shows a higher per-unit margin or a larger quantity at the profit-maximizing point, the resulting profit could not be as low as 280. Therefore, unless the graph’s ATC and Q imply such a result, this option is unlikely.
Option b. $490: This is the value identified in the provided answer field, signaling that, per the graph, the profit-maximizing quantity and price produce a total profit of 490. In monopoly analysis, profit equals total revenue minus total cost, or equivalently (P − ATC) × Q at the profit-maximizing output where MR = MC. If the graph shows P and Q such that TR − TC equals 490, then this option is consistent with the depicted optimum.
Option c. $980: A profit of 980 would require a substantially larger margin or quantity than indicated by the optimal MR = MC point on the graph. Unless the graph shows an unusually high price relative to cost at the chosen Q, 980 overstates the observed profit, making this option unlikely.
Option d. $700: A profit of 700 would correspond to a specific (P − ATC) and Q that the graph would need to display at the MR = MC intersection. If the graph’s indicated profit at the profit-maximizing output is 490, then 700 would be inconsistent with that crossing and the associated costs, making this option incorrect.
In summary, to determine the correct profit from the graph, you identify the profit-maximizing quantity (where MR = MC) and the corresponding price on the demand curve, then compute profit as TR − TC or (P − ATC) × Q. The graph as given indicates that this calculation yields 490, which is why option b is the correct choice. The other numbers do not align with the depicted profit at the MR = MC output, reflecting common misreadings such as assuming a different quantity, price, or cost relationship.

Figure 16-5The following graph depicts the market situation for a monopoly pastry shop called Bearclaws.Refer to Figure 16-5.Given that Bearclaws chooses the profit-maximizing price and quantity, what profit level will it obtain?

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Scenario 15-1A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44.Refer to Scenario 15-1. At Q = 500, the firm's profit is