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level of output and prices determined revenue and costs. At the optimal profit maximizing point where the Marginal Cost (MC) = Marginal Revenue (Q = 400 Units, P = 100).
Total cost, on the other hand, is a product of the average cost per unit and quantity of output (Spulber, 2017). Therefore,
(Where 40 is the average total cost of producing a single unit, inclusive of fixed costs.)
(c) The firm maximizes its profits when the MC = MR. Basically the level of profits do not depend on the competition in a monopoly since the competition is zero. Therefore, given that the demand (Average Revenue) is above the Average total Costs ( ATC) at the optimal price and quatity of 100 and 400 units respectively the supernomal profits are possible and are represented by the diagram above in the shaded region.
Since their exist no close substitute in the market the monoolist makes the supernomal profits since the Average Revenue (AR) exceeds the Average Cost (AC).
The profit is 60% of the total revenue, which is significantly high.