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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We start by restating the key numbers from the scenario: Q = 500, marginal revenue MR = 40, average revenue AR = 80, and average total cost ATC = 44. To evaluate profit, we compute total revenue (TR) and total cost (TC).

First, total revenue: TR = AR × Q = 80 × 500 = 40,000. This is the money the firm brings in from selling 500 units at an average revenue of 80 per unit.

Next, total cost: TC = ATC × Q = 44 × 500 = 22,000. This is the total cost incurred to produce 500 units.

Profit is TR − TC. So profit = 40,000 − 22,000 = 18,000.

Now evaluate each option:
- Option "$18,000.$": This matches the calculated profit (40,000 − 22,000 = 18,000). Therefore it is consistent with the given AR, ATC, and Q. This option is correct.

- Option "$20,000.$": If profit were 20,000, then TR − TC would have to equal 20,000. Given Q = 500 and AR = 80, TR is fixed at 40,000. That would require TC to be 20,000, but TC is ATC × Q = 44 × 500 = 22,000. Since 40,000 − 22,000 = 18,000, not 20,000, this option conflicts with the provided ATC and Q.

- Option "$22,000.$": A profit of 22,000 would require TR to be 44,000 if TC is 22,000. However, TR is determined by AR × Q = 80 × 500 = 40,000, not 44,000. Therefore this option is not feasible given the AR and Q.

- Option "$40,000.$": A profit of 40,000 would imply TC is zero (since TR is 40,000). But ATC is positive (44), and TC = ATC × Q = 22,000, so costs are not zero. This option contradicts the ATC and Q data.

In summary, comparing the computed profit with each option shows that only the 18,000 figure aligns with TR = 40,000 and TC = 22,000, given AR = 80 and ATC = 44 at Q = 500.

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 isMultiple choice

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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 isMultiple choice

Similar Questions

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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?

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?

If a monopolist's price is $20 at 20 units of output and marginal revenue equals marginal cost and average total cost equals $15, then the firm's total profit is:

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