Question

1. In the table below are demand and cost data for a monopolist. Complete the table by filling in the columns for total revenue, marginal revenue, and marginal cost. Then answer the four questions below. Quantity Price Total Revenue Marginal Total Cost Marginal Cost Revenue 0 $34 $20 32 4 26 10 14 a.) What output will the monopolist produce? b.) What price will the monopolist charge? c.) What total profit will the monopolist receive at the profit- maximizing level of output? d.) Explain, in a few words, why monopolists do not have a supply curve.

Answer 1

(A)

Quantity	Price	Total revenue	Marginal revenue	Total cost	Marginal cost
0	34	0		20
1	32	32	32	36	16
2	30	60	28	46	10
3	28	84	24	50	4
4	26	104	20	54	4
5	24	120	16	56	2
6	22	132	12	68	12
7	20	140	8	82	14
8	18	144	4	100	18
9	16	144	0	128	28
10	14	140	-4	160	32

Total revenue = Price * Quantity.

Marginal revenue = (Change in total revenue / Change in quantity)

Marginal cost = (Change in total cost / Change in quantity)

A monopolist produces at MR = MC

In the given table, MR = MC = 12. The output corresponding to it is 6 units.

Therefore, the monopolist will produce 6 units of output.

(B) The price corresponding to 6 units of output is $22.

Therefore, the price monopolist will charge is $22

(c) Total revenue corresponding to 6 units of output = $132.

Total cost corresponding to 6 units of output = $68.

Profit = TR - TC

Profit = $132 - $68

Profit = $64

(d) Monopolists do not have a supply curve because the monopolist decision to produce how much output corresponding to a price level does not depends only on the marginal cost but it also depends on the demand curve faced by the monopolist firm.