The amount of profit or loss per unit and in total

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Reference no: EM13189629

The best level of output for a monopolist in the short run is 500 units and is MR=MC. At this point Q=500, P= $11 and ATC= $8, so that the monopolist earns a profit of $3/per unit and a total profit of $1,500. Suppose that the AFC of the monopolist increase by $5 and that its AVC is $6 less than the new ATC at the best level of output.
a) What is the best level of output and price,

b) the amount of profit or loss per unit and in total and

c) whether it pays for the monopolist to produce?

Hint Given:
ATC=AFC + AVC. After AFC increases by $5 (ATC curve moves up vertically by $5 for every output Q) and MC, D and MR stay the same. The AFC for 500 units is $6, in other words the TFC is $3,000.

Reference no: EM13189629

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