Asked by Becca Moore on May 16, 2024
Verified
Refer to Scenario 10.1. How much profit will she make?
A) $-996
B) $0
C) $1,296
D) $1,568
E) none of the above
Demand Curve
A graphical representation showing the relationship between the price of a good and the quantity demanded by consumers at those prices.
Marginal Revenue
The extra revenue gained by selling an additional unit of a product or service.
Total Cost
The sum of all expenses incurred in the production of goods or services, including fixed and variable costs.
- Investigate the relationship between cost structures, like fixed and variable costs, and their impact on a monopolist's profitability.
Verified Answer
QE
Queenie EsperanceMay 20, 2024
Final Answer :
C
Explanation :
To find the profit, we need to calculate the total revenue (TR), total cost (TC), and then subtract TC from TR. We can use the total revenue equation to find TR:
TR = 40Q - 0.25
TR = 40(160-4P) - 0.25
TR = 6400 - 160P - 0.25
To find TC, we can use the total cost equation:
TC = 4Q
TC = 4(160-4P)
TC = 640 - 16P
Now we can find the profit:
Profit = TR - TC
Profit = (6400 - 160P - 0.25) - (640 - 16P)
Profit = 5760 - 144P
To find the profit-maximizing level of output, we can set marginal revenue equal to marginal cost:
MR = MC
40 - 0.5Q = 4
Q = 72
So the profit-maximizing price and quantity are P = $22 and Q = 72. Plug in these values to the profit equation:
Profit = 5760 - 144($22)
Profit = $1,296
Therefore, the answer is C.
TR = 40Q - 0.25
TR = 40(160-4P) - 0.25
TR = 6400 - 160P - 0.25
To find TC, we can use the total cost equation:
TC = 4Q
TC = 4(160-4P)
TC = 640 - 16P
Now we can find the profit:
Profit = TR - TC
Profit = (6400 - 160P - 0.25) - (640 - 16P)
Profit = 5760 - 144P
To find the profit-maximizing level of output, we can set marginal revenue equal to marginal cost:
MR = MC
40 - 0.5Q = 4
Q = 72
So the profit-maximizing price and quantity are P = $22 and Q = 72. Plug in these values to the profit equation:
Profit = 5760 - 144($22)
Profit = $1,296
Therefore, the answer is C.
Learning Objectives
- Investigate the relationship between cost structures, like fixed and variable costs, and their impact on a monopolist's profitability.