If a monopolist sells 200 units at $10 per unit and realises an average total cost of $6 per unit, what is the monopolist’s profit?

Question

BlackTom AI · Accepted Answer

To assess the monopolist’s profit, start by identifying the key components: price per unit, quantity sold, and average total cost (ATC) per unit.
Option a. 'a. $800' is the result of the standard profit calculation: profit equals (price minus average total cost) times quantity. Here, price P = $10, ATC = $6, so contribution per unit is $4. Multiplied by Q = 200 units gives 4 × 200 = $800. This aligns with the basic formula for profit when ATC is given as an average.
Option b. 'b. $1400' would imply a higher per-unit profit or a larger quantity than stated. If you tried to back-calculate, you'd need (P − ATC) × Q = 1400, which would require either a higher price, a lower ATC, or a larger quantity than provided; none of those match the given data, so this is inconsistent with the facts provided.
Option c. 'c. $2000' would require an even larger total contribution, meaning a bigger per-unit margin (P − ATC) or more units sold than specified. With P = 10 and ATC = 6, the margin is fixed at 4 per unit; achieving 2000 would demand 500 units at the same margin, which contradicts the given quantity.
Option d. 'd. none of the above' would only be correct if none of the numeric options matched the computed profit. Since the calculation yields $800 precisely, this option is incorrect.
In summary, applying profit = (P − ATC) × Q with P = 10, ATC = 6, and Q = 200 gives (10 − 6) × 200 = 800, so option a correctly reflects the profit, while the other options are inconsistent with the provided data.

MCD2020 Microeconomics - Trimester 1 - 2025

If a monopolist sells 200 units at $10 per unit and realises an average total cost of $6 per unit, what is the monopolist’s profit?

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MCD2020 Microeconomics - Trimester 1 - 2025

If a monopolist sells 200 units at $10 per unit and realises an average total cost of $6 per unit, what is the monopolist’s profit?

View Explanation

Log in for full answers

Similar Questions

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

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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?

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