Question

B. MONOPOLY

A corporation buys up all the individual one-person businesses and operates them as one corporation. The individuals work for the corporation as employees. There is now one corporation (Washington Physical Therapy Company) providing this service to everyone in the metropolitan area.   Technology and the actual services do not change.

For the Corporation:

Fixed cost per day: $4,000 (this is 100 times $40)

Variable cost per day for the Company (travel, supplies, etc.) based on existing operations of all 100 employees:

$40 for the first 500 sessions in a day

                        $45 for the 600^th   to 699^th session in a day

                        $50 for the 700^th to 799^th session in a day

                        $60 for the 800^th to 899^th session in a day.

                        $70 for the 900 to 999^th session in a day.

1. Complete the cost schedule for the Company

	Blood draws in a day
	100		200		300		400		500		600		700		800		900
Fixed cost	4000
Variable cost	4000
Total cost	9000
Average total cost	90.0
Marginal cost		40

2. On the Monopoly Graph at the end of this assignment, Graph the Marginal Cost (which is like a supply curve) and the Average Total Cost for the Company.

3. Graph the Demand Curve (Demand has not changed).

4. Determine the Total Revenue and the Marginal Revenue based on the Demand Schedule:

Price	Quantity Demanded (blood draws)	Total Revenue	Marginal Revenue (Change in Revenue/ Change in Quantity)
90	100	9000
			70
80	200	16,000
70	300
60	400
50	500
40	600
30	700
20	800
10	900

4. Graph the Marginal Revenue (at the quantity midpoint). E.g. graph $70 at a quantity of 150

5. Determine the profit maximizing level of output

6. What price will the company charge?

7. What will be the profit per unit (one physical therapy session) and the total company profit per day?

8. How does the price and quantity compare with the price and quantity before the industry became a monopoly?

9. Can we expect these profits to persist over time? Why or why not?

10. What are the implications for society?

Answer 1

We are supposed to do only four sub-parts to a question. For solution to other sub-parts please post as a separate question.