Question

Currently, a monopolist’s profit-maximizing output is 600 units per week and it sells its output at a price of $40 per unit. The firm’s total costs are $6,000 per week. The firm is maximizing its profit, and it earns $25 in extra revenue from the sale of the last unit produced each week.
a. What are the firm's weekly economic profits?
b. What is the firm's marginal cost?
c. What is the firm's average total cost?

Answer 1

Answer:

a. What are the firm's weekly economic profits?

• The company's weekly economic profit = total revenue - total accounting cost - total opportunity costs = (600 units x $40) - $6,000 = $24,000 - $6,000 = $18,000

b. What is the firm's marginal cost?

• since the firm is maximizing its profits, its marginal revenue = marginal cost. Since the marginal revenue of the last unit sold was $25, then the marginal cost of the last unit sold must also be $25.

c. What is the firm's average total cost?

• the firm's average total cost = total cost / total output = $6,000 / 600 units = $10 per unit