Suppose When a Monopolist Produces 50 Units Its Average Revenue

question 262

Multiple Choice

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist?

• A)The monopolist is currently maximizing profits, and its total profits are $200.
• B)The monopolist is currently maximizing profits, and its total profits are $250.
• C)The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit.
• D)The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit.

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Definitions:

Forecast The Future

The practice of making predictions based on current and historical information, often using statistical models and analysis.

Depreciation Expense

The deliberate partitioning of the expenditure for a solid asset over its period of utility.

Capital Intensity Ratio

A firm’s total assets divided by its sales, or the amount of assets needed to generate $1 in sales.

Retention Ratio

The retention ratio, in financial terms, refers to the percentage of a company's net income that is retained and not distributed as dividends to shareholders, indicating how much of its profit a company reinvests.