Question

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?

Answer 1

price	Quantity	cost	TR	MC	MR	profit
20	7	36	140			104
19	8	45	152	9	12	107
18	9	54	162	9	10	108
17	10	63	170	9	8	107
16	11	72	176	9	6	104
15	12	81	180	9	4	99

a. How much output should the monopolist produce?

answer: 9 quantity

Explanation: firm choose its quantity where MR+MC. but here in this case MR is not equal to MC at any quantity. so we will select the quantity that is when MR is greater than MC. or the quantity above where MR starts low than the MC. here in this case at quantity 10 MR is 8 and MC is 9. so we will select the above quantity where MR is greater than MC.where, MR is 10 and MC is 9.

b. What price should the firm charge?

answer: $18.

explanation: we will select the price as same as we selects the quantity. that is where MR=MC. and if there is no MR=MC than where MR is greater than MC.

c.What is the maximum amount of profit that this firm can earn?

answer: $108.

explanation:

profit= TR- TC.

=162-54

=108.