Monopolies and competitive markets. Looking for help starting at question 3 and
ID: 2441334 • Letter: M
Question
Monopolies and competitive markets. Looking for help starting at question 3 and A,B, C of question 3. Thank you!
b. How many bouquets will Molly's produce? c. How much will Molly's charge per bouquet? d. How much is Molly's total revenue? e. What is Molly's total cost? f. What is Molly's total profit? 3. Suppose the market for coffee in Collegetown is dominated by one large monopolist. Market demand for coffee and marginal revenue are given by the equations Qd400-P MR 400- 2Q where P is the price of coffee (in cents), and Q is the quantity of coffee per day, in thousands Suppose furthermore that the total cost and marginal cost of producing coffee is given by the equations TC 20+1000+Q2 MC 100+2QExplanation / Answer
a) The profot maximizing condition of a monopoly market is:
MR = MC
400 - 2Q = 100 + 2Q
4Q = 300
Q = 300 / 4 = 75
P = 400 - Q = 400 - 75 = $325
Thus, the profit maximizing quantity is 75 and price is $325.
b) TC = 20 + 100Q + Q2 = 20 + 100(75) + 752 = 20 + 7500 + 5625 = $13,145
TR = P * Q = $325 * 75 = $24,375
Profit = TR - TC = $24,375 - $13,145 = $11,230
c) The competitive market equilibrium occurs where
Qd = Qs
400 - P = 0.5P - 50
1.5P = 450
P = 450 / 1.5 = $300
Q = 400 - P = 400 - 300 = 100
Thus, the market equilibrium price is $300 and quantity is 100.