Discussing Allocative Efficiency
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Task: 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 $ 0 $ 60
1 58 100
2 57 136
3 56 168
4 55 200
5 54 235
6 53 276
7 52 322
8 51 376
C1~Q C2~PRICE C3~Total Cost
C=column
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Problem-solving question: 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 TR MR TC MC ATC
0 ...
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