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Monopoly operations

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Use the following data for a pure monopoly to calculate the firm's:

(a) total revenue, marginal revenue, marginal costs, and average total cost;

(b) its profit-maximizing output level and produce price;

(c) its profit.

(d) Use the price-cost formula to determine whether or not the firm's operations are productively-efficient.

(e) Use the price-cost formula to determine whether or not the firm's operations are allocatively-efficient.

Q (P = AR) TR MR TC MC ATC

0 $120 $100
1 119 200
2 118 280
3 117 340
4 116 380
5 115 400
6 114 460
7 113 560
8 112 665

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Solution Summary

Solution describes the steps to find out the profit maximizing output level and associated profit. It also checks if the firm's operations are productively and allocatively efficient.

Solution Preview

Please refer attached file for better clarity of table.

a)

Q P=AR TR MR TC MC ATC Profit TR-TC
0 120 0 100 -100
1 119 119 119 200 100 200.00 -81
2 118 236 117 280 80 140.00 -44
3 117 351 115 340 60 113.33 11
4 ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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