Question

Assume that there are no fixed costs and ac = mc = $200. at the profit-maximizing output and price for a monopolist, producer surplus is?

Answer 1

Assume that there are no fixed costs and ac = mc = $200. at the profit-maximizing output and price for a monopolist, the producer surplus is $3200.

The profit-maximizing quantity in a monopolist market is obtained by MR = MC condition.

MR and MC are intersected at point A. The price is obtained by the corresponding point of point A on the demand curve. This point is represented by point B.

The price represented by point B is 600 and the quantity is 8.

The producer surplus is calculated by the area below the price line and above the MC curve. The area is:

=(600 - 200)*(8-0)

=400*8

=3200

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