Answer the following Questions for a Monopoly Firm. Price Quantity TR MR MC TC Profit $15,000...

Answer the following Questions for a Monopoly Firm.

Price	Quantity	TR	MR	MC	TC	Profit
$15,000	0		----	----		-$20,000
14,000	1			$2,000
13,000	2				$23,000
12,000	3				$24,000
11,000	4				$25,000
10,000	5			$3,000
9,000	6			$5,000
8,000	7				$41,000
7,000	8			$12,000
6,000	9				$73,000
5,000	10			$30,000
4,000	11
3,000	12

a) Fill in the missing information above for this Monopoly Firm for its monthly production. Note there are no numbers for MC and MR when Q=0. Please note that the Total Variable Cost (VC) of producing 12 units of output is $183,000 and the Average Total Cost (ATC) of producing 11 units of output is $13,000.

b) At which unit of output does Diminishing Marginal Returns start? Please explain your answer using numbers.

c) If this firm produces in the Short Run, determine its profit maximizing/loss minimizing output level. Please explain your answer using MC and MR with numbers.

Solutions

Expert Solution

P	Q	TR	MR	MC	TC	PROFIT
15000	0	0			20000	-20000
14000	1	14000	14000	2000	22000	-8000
13000	2	26000	12000	1000	23000	3000
12000	3	36000	10000	1000	24000	12000
11000	4	44000	8000	1000	25000	19000
10000	5	50000	6000	3000	28000	22000
9000	6	54000	4000	5000	33000	21000
8000	7	56000	2000	8000	41000	15000
7000	8	56000	0	12000	53000	3000
6000	9	54000	-2000	20000	73000	-19000
5000	10	50000	-4000	30000	103000	-53000
4000	11	44000	-6000	40000	143000	-99000
3000	12	36000	-8000	60000	203000	-167000

TR=P*Q

MR=Change in TR/change in Q

MC=change in TC

TC=Cumulative of MC

Profit = TR-TC

Diminishing marginal returns starts when MC starts increasing at Output = 5 units

Setting MR=MC, this firm will produce 5 units when P=10000

Rahul Sunny answered 1 year ago

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