Consider a monopolist facing the following situation:

Quantity 0 10 20 30 40 50 60 70

Price $50 $45 $40 $35 $30 $25 $20 $15

Marginal Revenue $40 $35 $25 $15 $2.5 $2.5 $15

Total Cost $100 $370 $700 $960 $1120 $1225 $1650 $2250

Marginal Cost $27 $35 $26 $16 $11 $43 $60

Average Total Cost $37 $35 $32 $28 $25 $28 $32

A. Graph the following: Demand Curve Marginal Revenue Curve Marginal Cost Curve Average Total Cost Curve

B. Identify the profit maximization point for the monopolist. What are the price and quantities that will maximize profit? What is the total profit received at this point?

C. Suppose you were the regulator of this monopoly and you wished to set price and quantity at the perfectly competitive price and quantity, what would those values be?

D. Compare the results you got in B with the results in C.

Complete the following table filling in ALL the cells. When you have finished, graph the results on the blank graph provided. Review the completed graph and answer questions 1-4.

Worksheet - Cost and Industry Structure - Monopoly

Please fill in the empty spaces ion this schedule using the data provided for the quantities, prices and costs

.

Using the Schedule above and graph below answer the following questions:

1. What is the Profit maximizing Quantity? ( )

2. What is the Profit maximizing Price? ( )

3. How much are the fixed costs? ( )

4. How much profit will the firm earn at this profit maximizing point? ( )

1. Consider two monopolists: Up and Down. Up makes a good, then sells it to Down, who puts a better label on it then sells to the public. It costs Up $150 to make each good. Down’s only cost is what it has to pay Up for each good.

Up has demand and marginal revenue functions:

Price_U = 500 – 0.25Q_U                        MR_U = 500 – 0.5Q_U

Down has demand and marginal revenue functions:

Price_D = 600 – 0.25Q_D                        MR_D = 600 – 0.5Q_D

A. How do you know these are monopolists rather than competitive firms?

Besides the fact that the question says they are.

B. To maximize its profit, what quantity should Up produce?

C. To maximize its profit, what price should Up charge?

D. What is the maximum profit that Up can earn?

E. To maximize its profit, what quantity should Down produce?

F. To maximize its profit, what price should Down charge?

G. What is the maximum profit that Down can earn?

Ms. Smith, the owner and manager of the Clear Duplicating Service located near a major university, is contemplating keeping her shop open after 4PM and until midnight. In order to do so, she would have to hire additional workers. She estimates that the additional workers would generate the following total output (where each unit of output refers to 100 pages duplicated). If the price of each unnit of output is $10 and each worker hired must be paid $40 per day, how many workers should Ms. Smith hire?

Wokers hired 0   1     2   3    4    5   6

Total Product 0 12 22 30 36 40 42

Find the marginal revenue product of labor for the data in the problem above from the change in total revenue resulting from the employment of each additional unit of labor, and show that the number of workers that Ms. Smith should hire is the same as that obtained in the problem above.

Here is information for a county government:

The county has four special revenue funds, with the following characteristics:

Which of these special revenue funds also meet the second criterion for reporting as a major fund in the governmental funds financial statements, and therefore will be reported as major funds?

Pricing Strategy, Sales Variances

Eastman, Inc., manufactures and sells three products: R, S, and T. In January, Eastman, Inc., budgeted sales of the following.

At the end of the year, actual sales revenue for Product R and Product S was $2,519,000 and $3,234,600, respectively. The actual price charged for Product R was $22 and for Product S was $18. Only $8 was charged for Product T to encourage more consumers to buy it, and actual sales revenue equaled $334,800 for this product.

Required:

1. Calculate the sales price and sales volume variances for each of the three products based on the original budget.

2. Suppose that Product T is a new product just introduced during the year. What pricing strategy is Eastman, Inc., following for this product?

Samsung sells its four flagship products—cell phones, TVs, computing devices, and memory storage devices—through its exclusive showroom in a city. To support sales, it has hired 20 per-sons and trained them to service every product. Depending on the nature of the job, the cost of overhead expenses varies. The overhead cost of the cellphone section of the showroom per day is £70, for the TV section is £65, for the computing device section is £60, and for the memory storage section is £25. The store has allotted a budget of £1,000 for the showroom per day. A cell phone serviceman generates a revenue of £480 a day, a TV serviceman, £480, a computing devices serviceman, £450, and a memory storage section serviceman, £300. Each section needs at least two servicemen. The outlet wants to determine the number of servicemen to be assigned to each section that will maximize the revenue.

a. Formulate an integer programming model for this problem.

b. Solve this model by using the Excel QM for windows or solver.

Stivason Clinic uses client-visits as its measure of volume. During June, the clinic budgeted for 3308 client-visits, but it actually received 3243 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for April. All costs are mixed costs.

Data used in budgeting:

Fixed amount Variable amount per client visit

Revenue 27.49

Personnel expense 22516 8.02

Medical supplies exp. 523 4.42

Administration exp. 10733 0.83

Actual results:

Revenue 83232

Personnel expense 51526   

Medical supplies exp. 14956

Administration exp. 12677

1. Calculate the sales price variance (absolute value, whole number).

2. Is the above variance favorable or unfavorable?

3. Sales volume variance (absolute value, whole number):

4. Is the above variance favorable or unfavorable?

5. Personnel variance (absolute value, whole number):

6. Is the above variance favorable or unfavorable?