Refer to Figure 15-4. What area measures the monopolist's profit?

A) (B − Z) × O
B) (C − X) × N
C) (B − Y) × O
D) 0.5[(B − Z) × (P − N) ]

Question

Refer to Figure 15-4. What area measures the monopolist's profit?A) (B − Z)  × OB) (C − X)  × NC) (B − Y)  × OD) 0.5[(B − Z)  × (P − N) ]

Bente Vankeymeulen · Accepted Answer

Final Answer : C, Explanation :  The monopolist's profit is calculated by taking the difference between total revenue and total cost. In the context of a graph, this is represented by the area between the demand curve (which indicates the price consumers are willing to pay) and the average total cost curve (which indicates the cost to the monopolist), over the quantity of goods sold. The correct area is thus the rectangle formed by the height (B − Y), which represents the price above the average total cost per unit, and the width O, which represents the quantity of goods sold.

Refer to Figure 15-4. What area measures the monopolist's profit?

A) (B − Z) × O
B) (C − X) × N
C) (B − Y) × O
D) 0.5[(B − Z) × (P − N) ]

Definitions

Learning Objectives

Learning Objectives

Related questions