Assignment 1 (10 points)
Willy's Widget, a monopoly, faces the following demand schedule (sales in widgets per month):
Price
Quantity
80
10
75
20
70
30
65
40
60
50
55
60
50
70
45
80
40
90
35
100
30
110
25
120
20
130
Calculate marginal revenue over each interval in the schedule. If marginal cost is constant at $38 and the fixed cost is $400, what is the profit-maximizing level of output? What is the level of profit? Explain your answer using marginal cost and marginal revenue.
Repeat the exercise for MC = $18
Assignment 2 (10 points)
The following diagram shows the cost structure of a monopoly firm as well as market demand. Identify on the graph and calculate the following:
Profit maximizing output level
Profit maximizing price
Total revenue
Total cost
Total profit or loss
Assignment 1 (10 points)
Willy's Widget, a monopoly, faces the following demand schedule (sales in widgets per month):
|
Price |
Quantity |
|
|
80 |
10 |
|
|
75 |
20 |
|
|
70 |
30 |
|
|
65 |
40 |
|
|
60 |
50 |
|
|
55 |
60 |
|
|
50 |
70 |
|
|
45 |
80 |
|
|
40 |
90 |
|
|
35 |
100 |
|
|
30 |
110 |
|
|
25 |
120 |
|
|
20 |
130 |
Calculate marginal revenue over each interval in the schedule. If marginal cost is constant at $38 and the fixed cost is $400, what is the profit-maximizing level of output? What is the level of profit? Explain your answer using marginal cost and marginal revenue.
Repeat the exercise for MC = $18
Assignment 2 (10 points)
The following diagram shows the cost structure of a monopoly firm as well as market demand. Identify on the graph and calculate the following:
Profit maximizing output level
Profit maximizing price
Total revenue
Total cost
Total profit or loss
Related textbook solutions
Related questions
A local snow cone business sells snow cones in one size for $5. It has the following cost and output structure per hour.
|
Output (cones per hour) |
Total Cost (per hour) |
|
0 |
$40 |
|
10 |
85 |
|
20 |
120 |
|
30 |
145 |
|
40 |
160 |
|
50 |
195 |
|
60 |
245 |
|
70 |
300 |
|
80 |
370 |
a) Calculate the total revenue for the business at each rate of output. ($500)
b) Calculate the total profit for the business at each rate of output. ($500)
c) Is the business operating in the short run or the long run? ($500)
d) Calculate the profit-maximizing rate of output using the MR = MC rule. (Note: to do this you should first compute the marginal revenue and marginal cost from the table.) ($500)
Answer:
|
Output (cones per hour) |
TR |
Total Cost (per hour) |
Profit |
MR |
MC |
|
0 |
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|
10 |
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|
20 |
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|
30 |
|||||
|
40 |
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|
50 |
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|
60 |
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|
70 |
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|
80 |
