In: Economics

# Table refer to a monopolist demand and cost schedules. Quantity Demanded 0 1 3 4 5...

Table refer to a monopolist demand and cost schedules.
Quantity Demanded
0
1
3
4
5
6
Demand Price
20
18
16
14
12
10
8
Quantity Supplied
0
1
2
3
4
5
6
Total Cost
10
14
20
30
42
56
72

NB. Whole table

Derive the marginal revenue and marginal Cost Schedules.
Determine the monopolists profit maximizing price, quantity and economic profits.
Why is this position an equilibrium position for the monopolist.

## Solutions

##### Expert Solution

Solution:

Marginal revenue is the additional revenue earned by increasing quantity sold by a single unit. Similarly, marginal cost is the additional cost incurred when increased production by a single unit. Then, the required schedules can be derived using the given information as follows:

 Quantity, Q Price, P Total cost, TC Total revenue, TR = P*Q Marginal revenue, MR Marginal cost, MC Profit = TR - TC 0 20 10 0*20 = 0 - - 0 - 10 = -10 1 18 14 1*18 = 18 18 - 0 = 18 14 - 10 = 4 18 - 14 = 4 2 16 20 2*16 = 32 32 - 18 = 14 20 - 14 = 6 32 - 20 = 12 3 14 30 3*14 = 42 42 - 32 = 10 30 - 20 = 10 42 - 30 = 12 4 12 42 4*12 = 48 48 - 42 = 6 42 - 30 = 12 48 - 42 = 6 5 10 56 5*10 = 50 50 - 48 = 2 56 - 42 = 14 50 - 56 = -6 6 8 72 6*8 = 48 48 - 50 = -2 72 - 56 = 16 48 - 72 = -24

For the monopolists, we can clearly see from the above table that maximum profit is $12, which is generated at price of$14 per unit and quantity of 3 units.

For a monopolist, the optimal equilibrium position occurs where it's marginal cost equals the marginal benefit. Using the above table, we can see that this occurs at quantity level of 3 units (where MC = MR = 10). So, this position is the equilibrium position for the monopolist (notice how below this point there is a possibility to gain a higher profit, and beyond this level, the profits are reduced).

## Related Solutions

##### Refer to the demand and cost data for a pure monopolist given in the table.
OutputPriceTotal Cost0$300$25012752602250290322535042005005175680Refer to the demand and cost data for a pure monopolist given in the table. If the monopolist perfectly price-discriminated and sold each unit of the product at the maximum price the buyer of that unit would be willing to pay, and if the monopolist maximized profits, then the total profit received would be$675.$450.$1,125.$325.
##### A monopolist faces the following demand and cost schedules Price Quantity Total cost $20 7$36...
A monopolist faces the following demand and cost schedules Price Quantity Total cost $20 7$36 19 8 45 18 9 54 17 10 63 16 11 72 15 12 81 a. How much output should the monopolist produce? b. What price should the firm charge? c. What is the maximum amount of profit that this firm can earn?
Price ($) Quantity Demanded Quantity Supplied 0 25 0 1 21 1 2 17 3 3 13 6 4 9 9 5 5 12 6 1 15 7 0 18 Question: Suppose the government sets a price in this market at$2. a. Is this a price floor or a price ceiling? b. Does this create a shortage or surplus? c. What is the difference in quantity demanded at this $2 price relative to the market price? d. What is... ##### 1. The demand and supply schedules for hot dogs are: Price Quantity demanded (millions per week)... 1. The demand and supply schedules for hot dogs are: Price Quantity demanded (millions per week) Quantity supplied (millions per week) 40 170 90 50 160 100 60 150 110 70 140 120 80 130 130 90 120 140 100 110 150 110 100 160 a. What are the equilibrium price and equilibrium quantity of hot dogs? b. If the price for hot dogs were 90 cents, describe the situation in the market for hot dogs and explain what would... ##### The data below represents a demand schedule. Product Price ($) Quantity Demanded 6 0 5 1...
The data below represents a demand schedule. Product Price ($) Quantity Demanded 6 0 5 1 4 2 3 3 2 4 1 5 0 6 In the diagram below, draw a demand curve. Use the line tool to graphically show Demand. This line should only contain the two endpoints. Use the midpoint formula for Ed to determine price elasticity of demand for each of the four possible$1 price changes. Instructions: Input the your answers as positive values (absolute...