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 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