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The Marginal Revenue Curve: What is the monopoly's profit-maximizing output level?

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The marginal revenue curve of a monopoly crosses its marginal cost curve at $30 per unit, and an output of 2 million units. The price that consumers are willing and able to pay for this output is $40 per unit. If it produces this output, the firm's average total cost is $43 per unit, and its average fixed cost is $8 per unit.

a) What is this producer's profit-maximizing (loss-minimizing) output level?
b) What are the firm's economic profits (or economic losses)?

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Solution Summary

This solution briefly explains how to find profit maximizing level of output and economic profit (losses) at the given output.

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For any firm (regardless whether is it a monopoly or competitor), the profit max. condition is always marginal ...

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