Ed Scahill has acquired a monopoly in the production of Good X. Assume there are

Question

Ed Scahill has acquired a monopoly in the production of Good X. Assume there are no external costs or benefits of producing and consuming Good X imposed on the economy: The table below summarizes his current cost and revenue structure: Market Price Quantity Total Revenue Marginal Total Cost per Marginal Cost Sold Per Week per Week (S) RevenueWeek (S) 19 36 51 64 75 84 17 26 37 50 65 19 18 17 16 15 14 Does Ed face any Fixed Costs in operating his business? How do you know? Fill in the blanks present in the MR and MC columns. If Ed maximizes profits: A. Hewill produce & sell units ofGood X per week and charge a price of B. His Total Revenue will be C His Total Costs will be D. His Average Total Cost will be E He will earn a Total Profit of F. His level of Profit earned per unit produced & sold will be "If the Ed loses his The new short-run equilibrium market price will be equal to H. G. The new level of industry output (sales per week) will equal The amount of Economic Surplus generated in the Market for Good X will (circle one) 1. Stay the same 2. Rise 3.Fal4. Need More Info to Determine. L

Explanation / Answer

Ans)

Yes, Ed faces a fixed cost of 10 as the marginal cost for the 1st product is 7.When Q=0 then firms incur only fixed costs and no variable costs.This means that the fixed cost will be 17-7=10.

If Ed maximizes profits he will produce where MC=MR

A.He will sell and produce 4 units and charge a price of $16.
B.His total revenue will be 64.
C.His total costs will be 50
D.His average total cost will be 12.5

Market Price Quantity TR MR=TRn-TRn-1 Total Cost MC=TCn-TCn-1 ATC=TC/Q 19 1 19 19 17 7 17 18 2 36 17 26 9 13 17 3 51 15 37 11 12.33333 16 4 64 13 50 13 12.5 15 5 75 11 65 15 13 14 6 84 9 82 17 13.66667

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