Question

Question 1 Instructions: Show all steps for each part of the question below. The accompanying diagram shows the demand, marginal revenue, and marginal cost of a monopolist. Below the graph is the market demand curve.

Answer 1

Price	Quantity	Total Revenue = Price x Quantity	Average Revenue = Total Revenue / Quantity
80	10	800	80
70	20	1400	70
60	30	1800	60
50	40	2000	50
40	50	2000	40
30	60	1800	30
20	70	1400	20
10	80	800	10

b) Profit maximising quantity is where MC = MR, and on the graph it is on quantity = 30 units

c) Price that should be charged will be $60. We arrive at this by matching the price on the demand curve where quantity is 30.

d) If the firm is selling its goods in a pefectly competitive market then it will prouce till demand equals supply
Supply curve is represented by MC curve (rising MC curve is also the supply curve)
Under perfect competition this is the profit maximising condition as usually there zero profits in perfect compeitition.

At quantity 50 there demand = supply, and at such quantity, price is equal to $40