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Fin & Econ Analy

  1. Use the following table showing a monopolist’s demand schedule and short-run total cost schedule to answer the questions below.

 

Price Quantity Total cost
$11 0 $400
10 60 800
9 90 890
8 130 1,050
7 166 1,230
6 196 1,440
5 210 1,552

 

  • To maximize profit the firm will set a price of$__8_and sell _130____units output.
  • Profit (loss) at the profit-maximizing output is $_10
  • If the firm reduces price $1 from the profit-maximizing level, marginal revenue is $3.39_ and marginal cost is $5.00
  • If the firm reduces price $1 from the profit-maximizing level, profit (loss) will be $68.00

 

  1. The following figure shows the demand and cost curves facing a firm with market power in the short run.

 

 

  • The profit-maximizing level of output is

 

  • The firm will sell its output at a price of

 

  • What is the total revenue?

 

  • What is the total cost?

 

  • The firm earns profits of

 

 

 

  1. Use the chart below to answer the following questions

 

 

  • What is the profit maximizing quantity?

 

  • What is the price the firm will charge at the profit maximizing point?

 

  • What is the breakeven point price for the firm?

 

  • Calculate the total revenue

 

  • Calculate the total cost

 

  • Estimate the total profit for the firm.

 

 

  1. Refer to the following figure showing demand and marginal revenue for a monopoly.

 

 

 

 

  • If production costs are constant and equal to $10, what price will the monopoly charge? Explain.

 

 

 

  1. The following graph shows demand and marginal revenue for a monopoly.

 

  • At any price above $_______ and quantity below ________ demand will be elastic. Marginal revenue is ____________ over this range.

 

 

 

  • At any price below $_______ and quantity above ________ demand will be inelastic. Marginal revenue is _____________ over this range.

 

 

 

  • Demand is unitary elastic at a price of $______ and quantity of ________. Marginal revenue is _____________ at this price-quantity combination.

 

 

 

 

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