Question

Q1 The data below is for a firm operating in a monopoly situation. [6] Quantity Total Revenues Marginal Revenues Total Costs Prices Average Total Costs Marginal Costs 72 15 8 74 14 9 78 10 84 12 11 92 11 12 102 10 13 126 9 14 164 8 15 a) Assume the monopolist is not regulated, and charges a single price to customers. Determine the Profit Maximizing Price _Profit Maximizing Quantity Profit b) Assume the monopolist is now regulated to a fair return price. Determine the Profit Maximizing Price _Profit Maximizing Quantity Profit Q2 Consider the following information for personal fitness training operating in Surrey, BC. The service advertises as providing one-to-one training, using specialized equipment, in a clean small purpose-built facility, by a certified fitness trainer, with towel, locker, and nutritious juice services. [5] TR MR MC ATC Price Per Training session $50 Quantity Sessions Demanded Per Day 540 1 30 $35 2 5 25 530 3 15 15 O

Answer 1

Answer:

The table:

Price TR MR TC ATC MC Quantity 8 Profit 48 15 120 72 9.00 14 9 126 6 74 8.22 2 52 52 13 10 130 4 78 7.80 4 12 11 132 2 84 7.64 6 48 11 12 132 0 92 7.67 8 40 10 13 130 -2 102 7.85 10 28 9 14 126 -4 126 9.00 24 0 8 15 120 -6 164 10.93 38 -44

a) When the monopolist is unregulated,
profit maximizing quantity = 10 units; price = $13; profit = $52
reason: he will produce where MC = MR = 4. So, quantity will be 10; price will be 13 and profits will be 52 (shaded yellow)

b) When regulated, profit maximizing quantity = 14 units; price = $9; profit = 0
reason: He will now produce where price = ATC = 9. So, price = 9; quantity = 14; profit = 0 (TR = TC at this level). (shaded blue)