70% TR Q 1. The following data are from a monopoly. Use this data to answer the

Question

70% TR Q 1. The following data are from a monopoly. Use this data to answer the following parts of this question. | Price TR MR MC ATC Price MR MC 100 1.00 100.00 0.300.70 0.30 0.70 150 0.90 135.00 0.70 0.30 0.54 200 0.80 160.00 0.50 0.30 0.45 250 0.70 | 175.00 0.30 0.30 0.40 300 0.60 | 180.00 0.10 0.30 0.37 350 0.50 175.00 |-0.10 0.30 0.34 A. How many units of this good should the firm produce? Why? What price should this firm charge for its product? Why? (2) B. Calculate the economic profit (loss) at this output level. (2) 2. Assume that we have a firm that originally faces substantial competition in a small town. Over time, this firm eliminates its competition by either purchasing the other firms or by charging a lower price for the product than do their competitors. Eventually, this firm is the only firm left producing and selling this good in a 100-mile radius of the town. In addition, they get the government to issue them a patent so that they can be the sole seller of the good for the next 18 years. Discuss the impact of these changes on the firm and the customers who purchase this product? Be sure to address the price and quantity sold of the product, in addition to the profitability of the firm. Is this change beneficial for society as a whole? How could you determine the answer to this question? (4) 3. The market for Calloway golf clubs has the following demand and supply functions: Q = 4500 – 3.5P Q =- 2000 +7P Note that the quantity is in hundreds of sets of golf clubs and the price is in dollars. A. Calculate the equilibrium price and equilibrium quantity in the market for Calloway golf clubs. (2)

Explanation / Answer

Q1
Answer
A)
The firm produces at MR=MC because this is profit maximizing production where marginal profit=0

MC=MR=$0.3
were
Q=250
P=$0.70
B)
Profit=(P-ATC)*Q
=(0.7-0.4)*250
=$75
The economic profit is $75

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