Total Quantity Revenue Total Cost $90 $110 $150 $160 S150 $70 $85 $125 $190 $244
ID: 1115245 • Letter: T
Question
Total Quantity Revenue Total Cost $90 $110 $150 $160 S150 $70 $85 $125 $190 $244 4 13a. Consider Exhibit 1. Create three tables and label them profit, marginal cost and marginal revenue. Then, for each level of output, please fill in the tables by calculating profit, marginal revenue and marginal cost. Please show calculations and work. 13b. According to Exhibit 1 and based on your calculations, what is the profit-maximizing level of quantity for the monopolist? Explain why that particular quantity you picked is the profit-maximizing level of output(Quantity. 13c. What is the profit-maximizing price that the monopolist will charge? Please show your work and your calculations. 13d. Refer to Exhibit 1. Calculate average total cost at the profit-maximizing level of output. does the average variable costs of producing 4 units of output equal to? Please show your work and calculations. 13f. Based on this information, do you consider this monopolist a price searcher or a price taker? Why? Explain. 13e. Refer to Exhibit 1. Assuming that total fixed costs are $80, whatExplanation / Answer
(13-a)
(i) Marginal revenue (MR) = Change in TR / Change in Q
(ii) Marginal cost (MC) = Change in TC / Change in Q
(iii) Profit = TR - TC
(13-b)
Profit is maximized when MR equals MC, which holds true when MR = MC = $40 and quantity is 3 units.
(13-c)
When quantity is 3 units, Price = TR / Q = $150 / 3 = $50
(13-d)
When Quantity is 3 units, Average cost = TC / Q = $125 / 3 = $41.67
(13-e)
When Q = 4, Total variable cost (TVC) = TC - TFC = $190 - $80 = $110
Average variable cost = TVC / Q = $110 / 4 = $27.5
(13-f)
Monopolist is a price searcher because price and quantity are inversely related, indicating the demnd curve is downward sloping, which holds true when the firm is a price searcher.
Q TR TC MR MC PROFIT ($) ($) ($) ($) ($) 1 90 70 2 110 85 20 15 25 3 150 125 40 40 25 4 160 190 10 65 -30 5 150 244 -10 54 -94