Question

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 =

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