1) The following table shows the quantity sold of a monopolist\'s product at dif

Question

1) The following table shows the quantity sold of a monopolist's product at different prices Quantity (units) Price (S) 0 10 20 30 40 50 60 70 80 90 10 9 6 Find the total revenue and marginal revenue of the monopolist at the different quantities and curve and marginal revenue curve on the same graph (hint: total revenue price x quantity; marginal revenue - change in total revenue / change in output). b) If the monopolist faces a constant marginal cost of $5, what is the optimal output it produce? What price should be charged?

Explanation / Answer

1.a.

b

.If MC=5

Since monopolist profit maximizing condition are ;

MR=MC

But MR and MC are not equal at any output level, so we will take positive and very close to MC= $5,

As it can be seen in the table MR=10 is very close MC=5, so the monopolist should produce 50 units for maximizing the profit. The price should be charged corresponding to this quantity which is $5.

Hence profit-maximizing price is $5 and optimal quantity is 50 units.

Q P TR=P*Q MR 0 10 0 - 10 9 90 90 20 8 160 70 30 7 210 50 40 6 240 30 50 5 250 10 60 4 240 -10 70 3 210 -30 80 2 160 -50 90 1 90 -70

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