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# Demand Curve and Total Cost Curve

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1. Question 1 - 4 using the information presented in question 1.

A monopoly faces the following demand curve and total cost curve:
Q = 2400 -100P
TC = 150,000 + 6Q.

Find the profit maximizing level of price
a. P = \$15
b. P = \$16
c. P = \$17
d. P = 19

2. Find the profit maximizing output:
a. Q = 100 units
b. Q = 900 units
c. Q = 1000 units
d. Q = 90 units
e. cannot be derived

3. The total cost (TC) of the monopolist corresponding to the profit maximizing level of output is:

a. \$150,000
b. \$206,000
c. \$155,400
d. impossible to determine with the given information
e. \$200,000

4. The average total cost (ATC)of the firm corresponding to the profit maximizing level of output is:
a. \$166.66
b. \$132.32
c. \$160
d. \$172.66

5 . In the long run, new firms will keep entering a monopolistically competitive industry:
a. provided economies of scale are being realized.
b. even though losses are incurred in the short run.
c. until minimum average total cost is achieved.
d. until economic profits are zero.

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#### Solution Preview

1. Questtion 1 - 4 using the information presented in question 1.
A monopoly faces the following demand curve and total cost curve:
Q = 2400 -100P
TC = 150,000 + 6Q. Find the profit maximizing level of price
a. P = \$15
b. P = \$16
c. P = \$17
d. P = 19

The demand curve can be written into
P=24 - 0.01 Q
Then total revenue is
TR = P*Q = (24 - 0.01 Q)*Q = 24Q - 0.01 Q^2
So marginal revenue is
MR = dTR / dQ = 24 - 0.02Q

From TC = 150,000 + 6Q we calculate ...

#### Solution Summary

In the long run, new firms will keep entering a monopolistically competitive industry:
a. provided economies of scale are being realized.
b. even though losses are incurred in the short run.
c. until minimum average total cost is achieved.
d. until economic profits are zero.

\$2.49