Purchase Solution

Monopoly

Not what you're looking for?

Ask Custom Question

The local widget monopolist is retiring. He owns the only machine that produces widgets. He offers to sell the widget machine to you for $52,500. After you purchase the machine you can produce as many widgets as you want at no additional cost. You know that the long run demand for widgets is as follows:

P = 600 - 2Q where P is the price of widgets and Q is the amount of widgets produced.

Question should you buy the widget machine? Why?

Is this correct:

I set up the following table: (I'm sure there is some formula you can use)

P Q TR MR AR
600 0
598 1 598 598 598
596 2 1192 594 596
.......
300 150 45000 2 300
298 151 44998 -2 298

You should not buy the widget machine because you can only produce 150 at $300 for a total of $45,000. By producing 151 widgets total revenue and marginal revenue begin to decrease. You will have a loss of $7,500 ($52,500 - $45,000)

Purchase this Solution

Solution Preview

Hello!
Your answer is 100% correct. If you buy the machine, you ...

Purchase this Solution


Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.