Mark\'s Day Spa is a single-price monopoly The table shows the demand schedule f
ID: 1130490 • Letter: M
Question
Mark's Day Spa is a single-price monopoly The table shows the demand schedule for Mark's Day Spa (columns 1 and 2) and the firm's total cost Price Total cost Quantity dolars per (treatments treatment) per hour) schedule (columns 2 and 3). What is Mark's profit-maxdimizing output, price, and economie profit? Mark's profit-m aximizng output istreat ents an hour. Mari's profit-m uiri ng price is$(.treatment When Mark's produces the proft-maximizing output and charges the profit-maximizing prioe, eoonomic 12 an hour.Explanation / Answer
1.
Monopoly is a market structure where there is single seller but many buyers.
Profit maximizing (PM) could be found through the following table.
Price $
Output
TR = Price × Output
MR = TRn – TR(n -1)
TC
MC = TCn – TC(n -1)
Profit = TR – TC
12
0
0
0
1
1
-1
11
1
11
11
2
1
9
10
2
20
9
5
3
15
9
3
27
7
10
5
17 (PM)
8
4
32
5
17
7
15
7
5
35
3
26
9
9
The row relating to profit 17 is to be considered for answers, since $17 is the highest profit.
Answers: Output = 3; Price = $9; Economic profit = $17
Price $
Output
TR = Price × Output
MR = TRn – TR(n -1)
TC
MC = TCn – TC(n -1)
Profit = TR – TC
12
0
0
0
1
1
-1
11
1
11
11
2
1
9
10
2
20
9
5
3
15
9
3
27
7
10
5
17 (PM)
8
4
32
5
17
7
15
7
5
35
3
26
9
9
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