Question

Suppose a cable company provides cable service to a small town. The total revenue, marginal revenue, total cost, and marginal cost of providing various quantities of cable subscriptions (units in thousands per month) are presented in the table below.

Quantity	Price	Total Revenue	Marginal Revenue	Total Cost	Marginal Cost
0	192192	$0	-	0	-
1	191191	191191	191191	180180	180180
2	190190	380380	189189	270270	9090
3	189189	567567	187187	330330	6060
4	188188	752752	185185	420420	9090
5	187187	935935	183183	660660	240240
6	186186	11161116	181181	960960	300300

Assume the local cable company is a monopoly. To maximize profits, the monopoly should produce

nothing

(thousand) units. (Enter a numeric response using an integer.)

At that level of output, the cable company will earn economic profits of

$nothing

(thousand per month) .

Answer 1

Quantity	Price	Total Revenue	Marginal Revenue	Total Cost	Marginal Cost
0	192	0	-	0	-
1	191	191	191	180	180
2	190	380	189	270	90
3	189	567	187	330	60
4	188	752	185	420	90
5	187	935	183	660	240
6	186	1116	181	960	300

TR = P x Q

MR (nth unit) = TR (n units) - TR ((n-1) units)

MC (nth unit) = TC (n units) - TC ((n-1) units)

Profit would be maximized at an output where MR > = MC for the last quantity produced.

The monopoly should produce 4 thousand units.

At that level of output, the cable company will earn economic profits = 4 x 188 - 420 = $ 332 thousand