Question

Could someone do parts A) and B) please?

The following information is for a monopoly:

P	Q	TR	TC	MR	MC
6	0		1
5	1		3
4	2		6
3	3		10
2	4		15
1	5		21
0	6		28

a) Fill in the above table. At what quantity does this firm maximize profits? At what price does this firm sell its output? Draw a graph to illustrate profit maximization.

b) Explain the two effects on total revenue from a monopoly selling more output.

Answer 1

P	Q	TR	TC	MR	MC
6	0	0	1
5	1	5	3	5	2
4	2	8	6	3	3
3	3	9	10	1	4
2	4	8	15	-1	5
1	5	5	21	-3	6
0	6	0	28	-5	7

A.
The monopolist will produce where Mc=MR ie at 2 units of output at a price of $4.
TR=P*Q
MR=TRn-TRn-1
MC=TCn-TCn-1
B.
The monopolist has two effects on total revenue by selling more output
1.
Output effect:
This means that in as the amount of output being sold is higher the Q is higher
2.
Price effect
This means that in order to sell more output the price must be lowered as in the P would be lower.

6	0	0	1
5	1	5	3	5	2	3
4	2	8	6	3	3	3
3	3	9	10	1	4	3.33
2	4	8	15	-1	5	3.75
1	5	5	21	-3	6	4.2
0	6	0	28	-5	7	4.67

ATC=TC/Q