Question

The table below shows the total cost (TC) and marginal cost (MC) for Choco Lovers, a...

The table below shows the total cost (TC) and marginal cost (MC) for Choco Lovers, a monopolistic firm producing different quantities of chocolate gift boxes. Fill in the blanks in the table.

Quantity

Price

Total REVENUE

TOTAL COST

MARGINAL COST

MARGINAL REVENUE

0

$19

$0

$30

-

-

25

18

450

205

$7

30

510

237.5

6.5

12

35

16

272.5

10

40

15

600

312.5

8

8

45

14

630

10

50

13

650

422.5

12

4

INSTRUCTIONS; ENTER YOUR ANSWERS AS WHOLE NUMBERS. FOR PROFIT, ROUND YOUR ANSWER TO 2 DECIMAL PLACES.

Profit -Maximizing quantity=

Profit-maximizing price=

Profit =

Homework Answers

Answer #1

Working notes:

(1) Total revenue (TR) = Price x Quantity (Q), therefore

P = TR / Q

(2) Marginal cost (MC) = Change in Total cost (TC) / Change in Q, therefore

Change in TC = MC x Change in Q

(3) Marginal revenue (MR) = Change in TR / Change in Q

(4) Profit = TR - TC

Therefore

Q P TR TC MC MR Profit
0 19 0 30 - - -30.00
25 18 450 205 7 18 245.00
30 17 510 238 7 12 272.50
35 16 560 273 7 10 287.50
40 15 600 313 8 8 287.50
45 14 630 363 10 6 267.00
50 13 650 423 12 4 227.50

Profit is maximized when MR = MC, which holds true when MR = MC = $8.

Profit-maximizing quantity = 40

Profit-maximizing price = $15

Maximum profit = $287.50

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