Question

The marginal revenue curve of a monopoly crosses its marginal cost curve at ​$31 per​ unit, and an output of 2 million units.

What is the​ profit-maximizing (loss-minimizing)​ output? () million units.

The price that consumers are willing to pay for this output is ​$39 per unit. If it produces this​ output, the​ firm's average total cost is ​$41 per​ unit, and its average fixed cost is ​$5 per unit.

What are the​ firm's economic profits​ (or economic​ losses)? ​$()

Answer 1

profit-maximizing (loss-minimizing)​ output is where MR =MC

Here MR = MC at an output level of 2 million units

So profit-maximizing (loss-minimizing)​ output is 2 million units

P = 39, ATC = 41

Profit / loss = (P-ATC )* Q

Profit / loss = (39 - 41) * 2000000 = -4000000

economic loss = 4000000 or 4 million