4. (30 points) Answer the following Questions for a Monopoly Firm. Price Quantit

Question

4. (30 points) Answer the following Questions for a Monopoly Firm. Price Quantity TR MR MC TC Profit $15,000 0 0 14,000 1 1 |:400011400010000 |s52.0001-330DD $50,000 -50oDD 13,000 2 xe00o 00 53000 77o00 oooo lo00 54,000-1g0o0 12,000 3 1,000 44000 9Doo oo 10,000 5DDbooo oo 5,000 Aooo 9,000 6 008000 8,000 7S00000 looo0 6000bo 7,000 | 8 00010 | 8,000|77 0 0,000 4 0o01000 87,000-3000 5,000 I 10 001-40 Booollooocol-5000 5,000 10 4,000 11 3,000 12 00000 143000000 a) Fill in the missing information above for this Monopoly Firm. Note there are no numbers for MC and MR when Q-0. Please note that the AVC when Q is equal to 2 is $1,500; the TVC when Q-4 is $6,000 the ATC when Q is equal to 10 is $10,100 Please see Tabl& b) At which unit of output does Diminishing Marginal Returns start? Please explain your answer L MC ad to deMR This shous any addhmal npnt rected buy me vceives an c) If this firm produces in the Short Run, determine its profit maximizinghoss minimizing output level Please explain your answer using MC and MR. This happens aput cnel 3 the max mized tout put 1

Explanation / Answer

Following are the corrections:

a) is correct

b) is correct

c) for profit maximizing output, we need MC=MR. But here MC is not equal to MR at any levels of output and there is loss at every level of output. So we should rather go for loss minimisation which occurs at an output level of 6 where profit = 0.

Thus, required output =6.

d) Required price = 9000.

E) required profit = 0.

f) correct

g) TVC = TC - TFC = 63000-50000= $13000.

h) If the firm shuts down, loss =$50000 and if it produces, loss =0. THus the firm should continue production in short run to minimise losses.

i) The firm should shut down in long run it is not able to earn a positive profit.

Hope it helps. Revert in case of any doubts.

Thanks!

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.