Question

Currently, a monopolist’s profit-maximizing output is 200 units per week and it sells its output at a price of $70 per unit. The firm’s total costs are $10,000 per week. The firm is maximizing its profit, and it earns $35 in extra revenue from the sale of the last unit produced each week.
Instructions:
Enter your answers as whole numbers.
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 and Explanation:

Given:

Total output = 200 units

Sale price per unit = $70

Total cost = $10,000

Extra revenue from sale = $35

Computation:

1. Weekly economic profit:

Weekly economic profit = Total revenue - Total cost

Weekly economic profit = (200 x $70) - $10,000

Weekly economic profit = $14,000 - $10,000

Weekly economic profit = $4,000

2. Marginal cost:

Firm maximizing  its profit, so in this situation

Marginal revenue = Marginal cost

Marginal cost = Marginal revenue = $35

Marginal cost = $35

3. Average total cost:

Average total cost = Total cost / Total output

Average total cost = $10,000 / 200

Average total cost = $50