Question

Cut and paste this assignment into a Word file. Complete the assignment in that file. Submit the completed assignment to Blackboard as an attached Word file. Please do not cut and paste your work into the text box. I will only give credit to assignments submitted as attached Word files. Your file should have a .docx at the end of it, if it is a Word file.

DEX0 Enterprises, a monopoly, faces the following demand curve. DEX is owned by three sisters, Alice, Mary and Claire. At this time the firm faces a constant MC and ATC of $4.00 per unit of their product.

Price	Quantity Demanded	Total Revenue	Marginal Revenue
10	0
8	1
6	3
4	6
2	10
0	15

         

1. Complete the table by calculating Total Revenue and Marginal Revenue for this firm.

2. Alice is would like to see DEX’s product used by as many people as possible. Which price would she choose? How many units would DEX need to produce and distribute if Alice was in charge? You must justify or explain your answers to earn credit.

3. Mary wants to maximize total revenue. What price would she choose? How many units would DEX sell?  You must justify or explain your answers to earn credit.

4. Claire wants to maximize profits. What price would she choose? How many units would DEX sell?   You must justify or explain your answers to earn credit.

Answer 1

1)

P	Qd	TR	MR
10	0	0
8	1	8	8
6	3	18	5
4	6	24	2
2	10	20	-1
0	15	0	-4

TR = P x Q

MR = (TR(Qn) -TR(Qn-1))/(Qn - Qn-1)

2)

Alice would produce such that P = MC = ATC = 4 at the quantity produced, she would make no profit (and not make a loss) and maximize the quantity offered.

Quantity offered = 6 and Price = 4

3)

Total revenue would be maximized when MR (revenue earned by an additional unit of output) is positive or equal to zero.

Quantity = 6 (MR = 2 > 0) and Price = 4

4) Profits are maximized when MR > = MC (= 4)

When MR > MC, the additional unit earns more revenue in comparison to the cost and hence profit increases.

Quantity = 3 and Price = 6