Question

A monopoly finds that, at its present level of output and sales, marginal revenue equals $5 and marginal cost is $4.10 which of the following will maximize profits?

Answer 1

To determined the profit is being maximized, you need to make sure that the difference between the total revenue and total cost is greatest. So the formula we need to use in determining the maximized profit is

Profit = Total Revenue - Total Cost

Given

 TR = $5
 TC = $4.10

Solution

Profit = 5 - 4.10
          = 0.9 
The answer is 0.9.