A protein drink produce producer is a monopolist in a regional market. The follo

Question

A protein drink produce producer is a monopolist in a regional market. The following information represents the demand for protein drinks (with quantity measured in numbers of bottles) and the production cost (measured in dollars) for the monopolist. Complete each column in the table above. The monopolist wishes to maximize profits. Assuming that the monopolist charges all customers the same price, find the quantity the monopolist will choose and the price they will charge. Briefly explain why a single-pricing, profit-maximizing monopolist will always choose a price and quantity combination where demand is elastic.

Explanation / Answer

P Q TR MR TC MC

16 0 0 0 4 4

15 1 15 15 7 3

14 2 28 13 9 2

13 3 39 11 14 6

12 4 48 9 23 9

11 5 55 7 38 15

b. The monopoly who maximizes profits will produce till the point where MR = MC

So , Monopoly will produce 4 units and the charge Price = $12

c. A single pricing, profit maximizing, Monopolist will always choose P and Q combinations where demand is elastic because there is a relationship between price elasticity and marginal revenue as where the demand is elastic, the marginal revenue is positive and if demand is inelastic, marginal revenue is negative and hence Firm will not produce where marginal revenue is negative and thus will only produce where marginal revenue is positive and thus demand is elastic

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