Question

monopoly practice #1

1. what is the profit maximizing quantity?
2. what is the profit maximizing price (did you go all the way up to the d=ar=p curve from the profit maximizing point?
3. marginal revenue

4 marginal cost
5 average revenue
6 average total cost
7 average (per unit) profit (p - atc = ap)
8 total revenue (p x q)
9 total cost (atc x q)
10 total profit (tr - tc or ap x q)

Explanation:

Step1: Identify MR=MC quantity

Profit-maximizing quantity $Q=4$ (given, from MR-MC intersection)

Step2: Find profit-maximizing price

Price $P=6$ (given, from AR,D curve at $Q=4$)

Step3: Read Marginal Revenue

At $Q=4$, $MR=3$ (from MR curve)

Step4: Read Marginal Cost

At $Q=4$, $MC=3$ (from MC curve, MR=MC)

Step5: Read Average Revenue

$AR=P=6$ (AR=D=P curve at $Q=4$)

Step6: Read Average Total Cost

At $Q=4$, $ATC=4$ (from AC curve)

Step7: Calculate per-unit profit

Per-unit profit = $P-ATC = 6-4=2$

Step8: Calculate Total Revenue

$TR = P \times Q = 6 \times 4=24$

Step9: Calculate Total Cost

$TC = ATC \times Q = 4 \times 4=16$

Step10: Calculate Total Profit

Total Profit = $TR-TC = 24-16=8$

Answer:

1. 4
2. 6
3. 3
4. 3
5. 6
6. 4
7. 2
8. 24
9. 16
10. 8