The Graph Shown Represents the Cost and Revenue Curves Faced

question 128

Multiple Choice

The graph shown represents the cost and revenue curves faced by a monopoly. What profit is the monopolist earning?

• A)(P3 − P0)× Q1
• B)(P3− P1)× Q1
• C)(P1− P0)× Q1
• D)(P3− P0)/ Q1

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Definitions:

Break-even Sales

The amount of revenue needed to cover total costs, both fixed and variable, indicating the point at which a company neither makes a profit nor incurs a loss.

Margin of Safety

The difference between actual or projected sales and the sales level necessary to break even, as a buffer against uncertainty.

Contribution Margin

The difference between sales revenue and variable costs of a product or service, indicating how much contributes towards covering fixed costs and profit.

Variable Costs

Costs that vary in direct proportion to changes in the level of production or sales.