Question

Answer the questions on the right using the table of info on the left

т т т к т м м ТА Quantity Price AR MR TR 50 А Quantity 0 1 b) In your answer document, reproduce and fill in the revenue table shown here. Show two decimal places. 3 : fr Quantity втор Т Е Т Ето т н т TC F C VC MC AFC AVC ATC 94 940 NA NA NA NA 182 94 88 88 94 88 T 182 269.2 175.2 87.2 47 87.6 134.6 356.8 94 262. 8 8 7.6 31.3333 87.6 118.9333 445.6 351.6 88.8 23.5 87.9 111.4 536.4 442.4 90.8 18.8 88.48 107.28 629.6 535.6 93.2 15.6667 89.2667 104.9333 726 632 96.4 13.428690.2857 103.7143 826 732 100 11.75 91.5 103.25 94 836 104 10.4444 92.8889 103.3333 1038| 94 944 1089 .4 94.4 103.8 c) Given the cost structure seen in part (a) above and the demand seen in part (b), what is the monopolist's B profit maximizing price and 2 quantity? 110 $106.80 $103.80 $100.80 $97.80 $94.80 $91.80 $88.80 $85.80 $82.80 $79.80 $391.20 $474.00 $550.80 621.60 $686.40 $745.20 $798.00 $106.80 $106.80 $103.80 $100.80 $100.80 $94.80 $88.80 $82.80 $76.80 $88.80 $85.80 $82.80 $79.80 $52.80 94 930 d) Calculate the monopoly profit. 10 e) You are considering whether to buy a firm which has market power. One analyst tells you that the firm will earn at least one hundred dollars more than the amount you calculated in part (d) above. You have several years of profit data. Specify null and alternate hypotheses which will allow the data to prove that this would be a good purchase. f) Suppose the measured average of profit for the firm is in the 1% rejection region of the test. Describe your conclusion Describe your conclusion both in terms of the hypotheses and what it means. g) Suppose the measured average of profit for the firm is not in the 1% rejection region of the test. Describe your conclusion both in terms of the hypotheses and what it means.

Answer 1

b.

Q	P	TR	AR	MR
0.00	$	0.00
1.00	106.80	106.80	106.80
2.00	103.80	207.60	103.80	100.80
3.00	100.80	302.40	100.80	94.80
4.00	97.80	391.20	97.80	88.80
5.00	94.80	474.00	94.80	82.80
6.00	91.80	550.80	91.80	76.80
7.00	88.80	621.60	88.80	70.80
8.00	85.80	686.40	85.80	64.80
9.00	82.80	745.20	82.80	58.80
10.00	79.80	798.00	79.80	52.80

C. Monopolist's profit maximizing price and quantity can be derived by setting the condition MR = MC

From the table we can see that the condition is satisfying only when quantity equals to 4.Corresponding price equals to $97.8

d. Monopoly profit = TR -TC = $391.2 - $445.6 = -54.4 (net loss)

e. If we have a sample of profit over the years we can calculate the sample mean and sample standard deviation from that.It will be a good buy for me if the firm makes a positive net profit.

Hence , the null hypothesis: Mean profit < 0

Alternative hypothesis : Mean profit >=0