Answer the following Questions for a Monopoly Firm. Price Quantity TR MR MC TC P
ID: 1200161 • Letter: A
Question
Answer the following Questions for a Monopoly Firm.
Price
Quantity
TR
MR
MC
TC
Profit
$400
0
$2,000
390
1
$200
380
2
2,360
370
3
2,500
360
4
350
5
2,720
340
6
330
7
3,060
320
8
$250
310
9
3,630
300
10
$400
290
11
$500
a) Fill in the missing information above for this Monopoly Firm. Note there are no numbers for MC and MR when Q=0.
To complete the table you need to know that the ATC of producing 4 units of output is $650 and that the Total Variable Cost of producing 6 units of output is $870.
b) State the Total Fixed Cost for this firm. Please explain how you got your answer.
c) At which unit of output does Diminishing Marginal Returns start? Please explain your answer.
d) If this firm produces in the Short Run, determine its profit maximizing/loss minimizing output level. Please explain your answer using MC and MR.
e) If this firm produces in the Short Run, determine its profit maximizing/loss minimizing price.
f) If this firm produces in the Short Run, state its profit maximizing/loss minimizing profit amount.
g) If this firm shuts down in the Short Run, determine its profit maximizing/loss minimizing profit amount. Please explain your answer.
h) What should this firm do in the Short Run in order to maximize its profits/minimize its loss (produce or shut down)? Please explain your answer using numbers.
i) Explain what this firm should do in the Long Run.
Price
Quantity
TR
MR
MC
TC
Profit
$400
0
$2,000
390
1
$200
380
2
2,360
370
3
2,500
360
4
350
5
2,720
340
6
330
7
3,060
320
8
$250
310
9
3,630
300
10
$400
290
11
$500
Explanation / Answer
Fixed cost is $2000. as Q = 0.
Loss minimizing output is Q= 8 and P = 320, where MR=MC.
Price Quantity TR MR MC TC Profit TVC TFC $400 0 0 $2,000 0 2000 390 1 390 390 $200 2200 ($1,810) 200 2000 380 2 760 370 $160 2,360 ($1,600) 360 2000 370 3 1110 350 $140 2,500 ($1,390) 500 2000 360 4 1440 330 $100 2600 ($1,160) 600 2000 350 5 1750 310 $120 2,720 ($970) 720 2000 340 6 2040 290 $150 2870 ($830) 870 2000 330 7 2310 270 $190 3,060 ($750) 1060 2000 320 8 2560 250 $250 3,310 ($750) 1310 2000 310 9 2790 230 320 3,630 ($840) 1630 2000 300 10 3000 210 $400 4,030 ($1,030) 2030 2000 290 11 3190 190 $500 4,530 ($1,340) 2530 2000