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Determining profit maximzing price and output level

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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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Solution Summary

Solution describes the steps for determining profit maximizing output and price level for a pure monopoly firm. It also determines whether firm's operations are productively and allocatively efficient.

Solution Preview

Please refer attached file for better clarity of tables and formulas.

Solution:
a)

Q P=AR TR MR TC MC ATC Profit TR-TC
0 0 0 60 -60
1 58 58 58 100 40 100 -42
2 57 114 56 136 36 68 -22
3 ...

Solution provided by:
Lokesh Jain, MSc
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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