In a Monopoly market, a firm is a price setter. Fixed Costs remains at $1,000.00, where...

In a Monopoly market, a firm is a price setter. Fixed Costs remains at $1,000.00, where are the firm’s profit maximization point, break-even point, and shut-down?

Calculate the revenue, costs, and profit (if any).graph

Q	P=D	TC	TR	Profit	TVC	ATC	AVC	AFC	MC	MR
0	$399.99	$1,000	0	1,000	0	-	-	-	-	-
10	$379.99	$3,000	3799.9	799.9	2,000	300	200	100	200	379.99
20	$359.99	$4,000	7199.8	3199.8	3,000	200	150	50	100	339.99
30	$339.99	$5,000	10199.7	5199.7	4,000	166.67	133.33	33.33	100	299.99
40	$319.99	$7,000	12799.6	5799.6	6,000	175	150	25	200	259.99
50	$299.99	$9,500	14999.5	5499.5	8,500	190	170	20	250	219.99
60	$269.99	$12,000	16199.4	4199.4	11,000	200	183.33	16.67	250	120
70	$239.99	$15,000	16799.3	1799.3	14,000	214.3	200	14.3	300	59.99
80	$199.99	$18,000	15999.2	-2000.8	17,000	225	212.5	12.5	300	-80.01
90	$149.99	$22,000	13499.1	-8500.9	21,000	244.44	233.33	11.11	400	-250.01
100	$99.99	$25,000	9999	-15001	24,000	250	240	10	300	-350.01

Expert Solution

If the price is greater than minimum of AVC, then the firm should continue operating otherwise shut down.

Q	P=D	TC	TR	Profit	TVC	ATC	AVC	AFC	MC	MR	Profits	Shut Down/Produce
0	$399.99	$1,000	0	1,000	0	-	-	-	-	-
10	$379.99	$3,000	3799.9	799.9	2,000	300.0	200.0	100.0	200	379.99	799.9	Produce
20	$359.99	$4,000	7199.8	3199.8	3,000	200.0	150.0	50.0	100	339.99	3199.8	Produce
30	$339.99	$5,000	10199.7	5199.7	4,000	166.7	133.3	33.3	100	299.99	5199.7	Produce
40	$319.99	$7,000	12799.6	5799.6	6,000	175.0	150.0	25.0	200	259.99	5799.6	Produce
50	$299.99	$9,500	14999.5	5499.5	8,500	190.0	170.0	20.0	250	219.99	5499.5	Produce
60	$269.99	$12,000	16199.4	4199.4	11,000	200.0	183.3	16.7	250	120	4199.4	Produce
70	$239.99	$15,000	16799.3	1799.3	14,000	214.3	200.0	14.3	300	59.99	1799.3	Produce
80	$199.99	$18,000	15999.2	-2000.8	17,000	225.0	212.5	12.5	300	-80.01	-2000.8	Shut Down
90	$149.99	$22,000	13499.1	-8500.9	21,000	244.4	233.3	11.1	400	-250.01	-8500.9	Shut Down
100	$99.99	$25,000	9999	-15001	24,000	250.0	240.0	10.0	300	-350.01	-15001	Shut Down

Rahul Sunny answered 3 years ago

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