Paradox Dental, Ltd., enjoys a local monopoly in the provision of oral examination services in Tuskegee, Alabama. Total and marginal revenue relations for the standard procedure are:
TR = $250Q - $0.001Q2
MR = dTR/dQ = $250 - $0.002Q
Marginal costs (and average variable costs for the process are stable at $150 per unit.
Fixed costs are zero.
A. As a monopoly, calculate Paradox Dental's output, price, and profits at the profit-maximizing activity level.
B. What price and profit levels would prevail based on the assumption that new entry into the local market results in competitive market pricing?
A. Given that,
TR = $250Q-$0.001Q^2
MR = dTR/dQ = $250-$0.002Q
Marginal Cost, MC = $150
As we know that, a monopoly can maximize it ...
This solution is comprised of a detailed step-by-step explanation of how to calculate output, price and profits at the profit-maximizing level. These concepts are analyzed within the scenario of Paradox Dental, Ltd., which enjoys a monopoly in Tuskegee, Alabama.