Homework Answers
| Output per unit of Time, Q | Price, P | Total Revenue, TR=P*Q | Total Cost, TC | Marginal Revenue=MR=Change in TR/Change in Q | Marginal Cost, MC=Change in TC/Change in Q |
| 0 | 32 | 0 | 12 | ||
| 1 | 28 | 28 | 20 | 28 | 8 |
| 2 | 24 | 48 | 25 | 20 | 5 |
| 3 | 20 | 60 | 31 | 12 | 6 |
| 4 | 16 | 64 | 41 | 4 | 10 |
| 5 | 12 | 60 | 56 | -4 | 15 |
| 6 | 8 | 48 | 79 | -12 | 23 |
| 7 | 4 | 28 | 117 | -20 | 38 |
A monopolist will continue to produce as long as MR is higher than or equal to MC to maximize profit.
We can see in above table that MR>MC till Q=3 after that MR<MC. So, monopolist will choose to produce 3 units of output/ unit time.
So, optimal output is 3 units of output per unit time.
Total profit at optimal output=TR-TC=60-31=$29 per unit time
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facing a monopolist producer.
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