Question

4. The following are the demand and total cost schedules for the Normal Telephone Company, a local monopoly.

Output (# of calls) |
Price (dollars per call) |
Total Cost (dollars) |

0 |
.12 |
0 |

50,000 |
.11 |
2,000 |

100,000 |
.10 |
6,500 |

150,000 |
.09 |
11,000 |

200,000 |
.08 |
16,000 |

250,000 |
.07 |
23,000 |

300,000 |
.05 |
32,000 |

How much output will Normal Telephone company "produce," and what price will it charge?

Will it earn a profit? How much? (Hint: You first have to compute its MR and MC schedules. If you have two answers, choose the one with the lowest price.)

Answer #1

Output |
Price |
Total Cost |
||||

(# of calls) |
(dollars per call) |
(dollars) |
TR |
MR |
MC |
Profit |

0 |
0.12 |
0 |
0 |
|||

50,000 |
0.11 |
2,000 |
5500 |
0.11 |
0.04 |
3,500 |

1,00,000 |
0.1 |
6,500 |
10000 |
0.09 |
0.09 |
3,500 |

1,50,000 |
0.09 |
11,000 |
13500 |
0.07 |
0.09 |
2,500 |

2,00,000 |
0.08 |
16,000 |
16000 |
0.05 |
0.1 |
0 |

2,50,000 |
0.07 |
23,000 |
17500 |
0.03 |
0.14 |
-5,500 |

3,00,000 |
0.05 |
32,000 |
15000 |
-0.05 |
0.18 |
-17,000 |

From the above table, it would produce an output where MC=MR

It would produce an output of 1,00,000 # calls

It will charge the price of 0.1 dollars per call

Yes it would earn a profit of $3500

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Output
Total Cost
Marginal Cost
Average Total
(Units)
($)
($/unit)
Cost ($/unit)
0
50
--
--
10
120
7=(120-50)/(10-0)
12=(120-10)
20
170
?
?
30
210
?
?
40
260
?
?
50
330
?
?
60
430
?
?
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Total Cost
P ($)
Q
Q
TC ($)
20
1
1
2
18
2
2
6
16
3
3
11
14
4
4
18
12
5
5
26
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Quantity Demanded
Total Revenue
Marginal Revenue
Total Cost
Marginal Cost
Average Total Cost
20
0
8
18
1
14
16
2
22
14
3
32
12
4
44
10
5
58
8
6
74
6
7
92
4
8
112
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Average
Quantity
Total Marginal
Total
Marginal
Total
Price
Demanded Revenue
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$20
0
$8
$18
1
$14
$16
2
$22
$14
3
$32
$12
4
$44
$10
5
$58
$8
6
$74
$6
7
$92
$4
8
$112
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Total Cost
Total Revenue
Marginal Revenue
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Average Total Cost
Profit/
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0
150
100
1
138
150
2
125
184
3
113
208
4
100
227
5
88
250
6
75
280
7
63
318
8
50
366
9
38
425
10
25
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