A protein drink producer is a monopolist in a regional market. The following inf

Question

A protein drink 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 costs (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

Answers:

a). Table

b). The profit maximizing level of output for a monopolist will be when MR=MC

so in this question, MR=MC at 4 units of output so the quantity that the monopolist will choose will be 4 units at a price of 12.00

c). A monopolist firm is like an industry as the single seller constitutes the entirte market for the product, which has no close substitutes. So a monopolist has full freedom and power to fix price for the product. However, demand is not in the control of monopoly firm. In order increase the output to be sold, monopolist will have to reduce the price.Therefore, monopoly firm faces a downward sloping demand curve. A monopolist firm faces a downward sloping demand curve as more output can be sold only by reducing the price. As a result, revenue generated from every additional unit is less than the price of the product.

Price Qd TR (P x Q) MR(TRn - TR n-1) TC MC (TCn - TCn-1) 16.00 0 0 - 4.00 - 15.00 1 15 15 7.00 3 14.00 2 28 13 9.00 2 13.00 3 39 11 14.00 5 12.00 4 48 9 23.00 9 11.00 5 55 7 38.00 15

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