Which of the following lists the correct order of steps to calculate a monopolist's profit using a graph?

• A. 1. Calculate average cost at every quantity. 2. Choose the quantity with the lowest average cost. 3. Set price equal to marginal cost. 4. Compute profit.
• B. 1. Find the price where marginal cost equals demand. 2. Determine the quantity from the marginal revenue curve. 3. Calculate profit by subtracting marginal cost from marginal revenue.
• C. 1. Find the intersection of the demand and supply curves. 2. Use that quantity to determine price and profit.
• D. 1. Find the quantity where marginal revenue equals marginal cost. 2. Determine the price from the demand curve at that quantity. 3. Calculate total revenue and total cost. 4. Subtract total cost from total revenue to find profit.

Answer: (D)

Verified step by step guidance

1. Identify the quantity where the monopolist's marginal revenue (MR) equals marginal cost (MC). This is the profit-maximizing output level because producing beyond this point would add more to cost than revenue.
2. Using the quantity found in step 1, determine the price by locating this quantity on the demand curve. The demand curve shows the highest price consumers are willing to pay for that quantity.
3. Calculate total revenue (TR) by multiplying the price found in step 2 by the quantity: \(TR = P \times Q\).
4. Calculate total cost (TC) by finding the average cost (AC) at the chosen quantity and multiplying by quantity: \(TC = AC \times Q\).
5. Find the monopolist's profit by subtracting total cost from total revenue: \(\text{Profit} = TR - TC\).