Table 15-19
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Refer to Table 15-19. If a monopolist faces a constant marginal cost of $9, how much output should the firm produce?
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Quantity | Price | TR | MR |
0 | 20 | 0 | ---- |
1 | 18 | 18 | 18 |
2 | 16 | 32 | 14 |
3 | 14 | 42 | 10 |
4 | 12 | 48 | 6 |
5 | 10 | 50 | 2 |
6 | 8 | 48 | -2 |
7 | 6 | 42 | -6 |
8 | 4 | 32 | -10 |
9 | 2 | 18 | -14 |
10 | 0 | 0 | -18 |
TR = price * quantity
MR = (change in TR / change in quantity)
A monopolist produces till MR is higher than MC or MR = MC.
The firm faces a marginal cost of $9 at each level of output.
We can see that, till 3 units of output MR is higher than MC. Hence, firm should produce 3 units of output.
Answer: Option (B)
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