Q1: The data below relate to a monopolist and the product it produces. calculate

Question

Q1: The data below relate to a monopolist and the product it produces. calculate the marginal revenue and marginal cost for each quantity

you can copy the chart and paste in the answer box

marginal

revenue

marginal

cost

Q2: from the chart above, what is the profit maximizing price and quantity?

Quantity Price per Unit

marginal

revenue

Total Cost

marginal

cost

0 $22 undefined $20 undefined 1 $20 $24 2 $18 $27 3 $15 $32 4 $14 $40 5 $12 $49 6 $10 $59 18 16 14 12 10 ATC1 AVC1 4 2 MR1 D1 10 20 30 40 50 60 70 80 90

Explanation / Answer

Q3

A. $12 and 40 units.

Monopolist is a price Maker. He will determine the quantity of output that will maximize revenue. The monopolist faces a downward sloping demand curve because he can sell more if he lowers the price. The profit maximizing price and output is where marginal revenue equals marginal cost, then it is extended to the market demand curve to determine what market price corresponds to that quantity.

Quantity Price per unit Total Revenue Marginal Revenue Total cost Marginal cost $ $ $ $ $ 0 22 0 Undefined 20 Undefined 1 20 20 20 24 4 2 18 36 16 27 3 3 15 45 9 32 5 4 14 56 11 40 8 5 12 60 4 49 9 6 10 60 0 59 10 Marginal cost is the extra or additional cost of producing 1 extra unit of output. Marginal revenue is the additional revenue earned by producing one more unit of output. Total revenue = Price times quantity. 0 Profit maximization occurs when MR=MC. The profit maximization point is 4 units.

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