At an output of 1,000 units, a monopoly firm’s average revenue is $40, its marginal revenue is $30, its marginal cost is $30, its average variable cost is $35, and fixed costs are $5,000. Given this information, we can conclude that the monopolist: a. is earning zero economic profit. b. is earning an economic profit equal to $5,000. c. is making an economic loss and should shut down. d. should increase output to maximize profit.
At an output of 1,000 units, a monopoly firm’s average revenue is $40, its marginal revenue is $30, its marginal cost is $30, its average variable cost is $35, and fixed costs are $5,000. Given this information, we can conclude that the monopolist: a. is earning zero economic profit. b. is earning an economic profit equal to $5,000. c. is making an economic loss and should shut down. d. should increase output to maximize profit.
Chapter8: Monopoly
Section: Chapter Questions
Problem 15SQ
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Question
At an output of 1,000 units, a
a. is earning zero economic profit.
b. is earning an economic profit equal to $5,000.
c. is making an economic loss and should shut down.
d. should increase output to maximize profit.
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