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Difficulty: EasyMonopoly: Short-Run and Long-Run Price and Output Determination

A profit-maximizing monopolist produces at an equilibrium output level of 100100 units. At this output, the product is sold at a price of $60\$60 per unit and the average total cost is $45\$45 per unit. What is the total profit earned by the monopolist in dollars?

Answer: 1500 dollars

Answer

The total profit earned by the monopolist is 15001500 dollars.
Total profit is calculated as (P−ATC)×Q=(60−45)×100=15×100=1500(P - ATC) \times Q = (60 - 45) \times 100 = 15 \times 100 = 1500 dollars.

Step-by-Step Solution

1
Calculate Total Revenue (TRTR)
TR=$6,000TR = \$6,000
Total revenue is obtained by multiplying price per unit by total output (P×Q=60×100P \times Q = 60 \times 100).
2
Calculate Total Cost (TCTC)
TC=$4,500TC = \$4,500
Total cost is obtained by multiplying average total cost per unit by total output (ATC×Q=45×100ATC \times Q = 45 \times 100).
3
Calculate Profit (π\pi)
π=$1,500\pi = \$1,500
Economic profit is the excess of total revenue over total cost (π=TR−TC=6,000−4,500\pi = TR - TC = 6,000 - 4,500).

Key Concept

Short-run monopoly profit calculation using revenue and cost figures.
Estimated Time:1m 0s
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Topics

Monopoly: Short-Run and Long-Run Price and Output Determination

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