Suppose you are given the following information for Company B!, a monopoly which
ID: 1177284 • Letter: S
Question
Suppose you are given the following information for Company B!, a monopoly which is the sole producer of high quality, highly caffeinated soda. This monopolist seeks to maximize profits and uses the MR=MC RULE to find its profit maximizing (or loss minimizing) level of output. Show calculations.
Q (# cases demanded)
P (price per case)
Total Revenue (TR)
Marginal Revenue (MR)
Total Cost (TC)
Marginal Cost (MC)
0
$10.00
$0
---
$0.50
---
1
$9.50
$7.50
2
$9.00
$14.00
3
$8.50
$20.25
4
$8.00
$26.75
5
$7.50
$33.50
6
$7.00
$40.50
7
$6.50
$48.00
8
$6.00
$57.00
9
$5.50
$68.00
10
$5.00
$81.00
a. Write down the formulas for, and then fill in the columns for TR, MR, and MC
b. What is the profit maximizing level of output (Q*) AND price (P*) for Company B!
c. Calculate the total economic profit that Company B! would receive by producing at the profit maximizing output level and price.
Q (# cases demanded)
P (price per case)
Total Revenue (TR)
Marginal Revenue (MR)
Total Cost (TC)
Marginal Cost (MC)
0
$10.00
$0
---
$0.50
---
1
$9.50
$7.50
2
$9.00
$14.00
3
$8.50
$20.25
4
$8.00
$26.75
5
$7.50
$33.50
6
$7.00
$40.50
7
$6.50
$48.00
8
$6.00
$57.00
9
$5.50
$68.00
10
$5.00
$81.00
Explanation / Answer
C
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