Answer
A profit-maximizing monopolist will produce the quantity of output at which its marginal cost(MC) is equal to the marginal revenue(MR), and then selects the price following the market demand curve. To find the profit maximizing quantity of this monopolist, we have to first calculate the total revenue(TR), MR,and MC.To calculate them, three more columns, named total revenue,marginal revenue, and marginal cost have been added to the main table.
Output in Gallons(Q) | Price per Gallon(P) | Total Cost(C) | Total Revenue (TR)=Q*P |
Marginal Revenue(MR)=d(TR)/dQ |
Marginal Cost(MC)=d(TC)/dQ |
50,000 | $0.28 | $6,000 | $14,000 | - | - |
100,000 | 0.26 | 15,000 | 26,000 | 0.24 | 0.18 |
150,000 | 0.22 | 22,000 | 33,000 | 0.14 | 0.14 |
200,000 | 0.20 | 32,000 | 40,000 | 0.14 | 0.2 |
250,000 | 0.16 | 46,000 | 40,000 | 0 | 0.28 |
300,000 | 0.12 | 64,000 | 36,000 | -0.08 | 0.36 |
From the above table, we see that MR, and MC both are same ($0.14) for 150,000 gallons of output.So the monopolist will produce this amount of output. From the table, we see, that for 150,000 gallons of output, the monopolist charges $0.22. So the profit-maximizing price is $0.22.
Profit = Total Revenue - Total Cost
If TR>TC, then profit is positive , and if TR<TC, then profit is negative or loss.
Here, at 150,000 gallons of output, the monopolist's TR is $33,000, and TC is $22,000.
AS TR>TC, so this monopolist earns profit.and the amount of the profit is,
Profit= $33,000 - $22,000
or, Profit= $11,000
Therefore, the profit-maximizing monopolist, Company Town Water, will produce, 150,000 gallons of water.It will charge $0.22 for this amount of output, and its profit is $11,000.
_____________________________________________________________________
following are the demand and total cost schedules unit) is a 4. A monc Group A...
A publishing company faces the following total cost and demand schedules: Books Price Total Cost $ 0 - 10 1 10 12.5 2 8 14.5 3 7 16.0 4 6 17.0 5 5.2 19.0 6 3.5 21.5 7 2 25.0 a) Calculate the company’s fixed cost, average cost, and marginal cost. b) Calculate the Total Revenue, average revenue and marginal revenue. c) If the company wants to maximize profits, how many books should it sell? (Use MR = MC!) What...
Do No Harm: 4 6. Breakdown of a cartel agreement Consider a town in which only two residents, Brian and Crystal, own wells that produce water safe for drinking. Brian and Crystal can pump and sell as much water as they want at no cost. For them, total revenue equals profit. The following table shows the town's demand schedule for water. Quantity Demanded (Gallons of water) Total Revenue (Dollars) Price (Dollars per gallon) 6.00 5.50 5.00 4.50 4.00 248 450...
3. The chart illustrates your local water comnany's natural monopoly. The diagram shows the demand curve for water, the company's marginal revenue curve. its marginal cost curve (marginal costs are constant), and its average total cost curve. The government wants to regulate the monopolist by imposing a price ceiling. (20 points) a. Label the curves -Demand (D) Marginal Revenue (MR) Marginal Cost (MC) and Average Total cost (ATC) b. If the government does not regulate this monopolist, which price will...
Scenario A: A monopolist faces the following demand curve, marginal revenue curve, total cost curve for its product: Q=3500-5p MR= 250-Q TC=15Q MC=100 What level of output maximizes total revenue? What is the profit maximizing level of output? What is profit maximizing price? How much profit does the monopolist earn? Suppose that a tax of $10 for each unit produced is imposed by state government. What is the profit maximizing level of output
A: A monopolist faces the following demand curve, marginal revenue curve, total cost curve for its product: Q=3500-5p MR= 250-Q TC=15Q MC=100 What level of output maximizes total revenue? What is the profit-maximizing level of output? What is the profit-maximizing price? How much profit does the monopolist earn? Suppose that a tax of $10 for each unit produced is imposed by the state government. What is the profit-maximizing level of output?
Scenario A: A monopolist faces the following demand curve, marginal revenue curve, total cost curve for its product: Q=3500-5p MR= 250-Q TC=150 MC=100 What level of output maximizes total revenue? What is the profit maximizing level of output? What is profit maximizing price? How much profit does the monopolist earn? Suppose that a tax of $10 for each unit produced is imposed by state government. What is the profit maximizing level of output
#1 1. A firm has the following demand and total cost schedule. TR Profit MR MC O 0 10 20 30 40 50 60 P 100 90 80 70 60 50 40 TC 200 400 600 800 800 1,000 1.200 1.400 a) Is the firm a price-taker or price searcher? Explain. b) Complete the Total Revenue (TR) and Profit schedules. c) How many units of output (Q) should the firm produce to maximize profits? d) What price (P) should the...