Explore BrainMass
Share

Explore BrainMass

    Finding costs and maximizing profits for a monopoly

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A monopolist has demand and cost curves given by:
    Q = 1000 - 2P
    TC = 5,000 + 10Q

    Find average cost (AC), average variable cost (AVC), marginal cost (MC), marginal revenue (MR).

    a. What is the quantity that maximizes profit? What is the revenue and profit at that point?
    b. What is the quantity that maximizes revenue? What is the revenue and profit at that point?

    © BrainMass Inc. brainmass.com April 3, 2020, 11:35 pm ad1c9bdddf
    https://brainmass.com/economics/monopolies/finding-costs-and-maximizing-profits-for-a-monopoly-507364

    Solution Preview

    TC = 5000 + 10Q
    AC = TC/Q
    AC = (5000 + 10Q)/Q
    AC = 5000/Q + 10

    TC = Fixed Cost (FC) + Total Variable Cost (TVC)
    FC = 5000
    TVC = 10Q
    AVC = TVC/Q
    AVC = 10Q/Q
    AVC = 10

    MC is the derivative of TC.
    TC = 5000 + 10Q
    MC = 10

    Q = 1000 - ...

    Solution Summary

    Given only a monopolist's demand and total cost functions, this solution shows how to calculate average cost (AC), average variable cost (AVC), marginal cost (MC), marginal revenue (MR), profit-maximizing quantity and revenue-maximizing quantity. All calculations are shown in detail.

    $2.19

    ADVERTISEMENT