Monopoly Profit Maximizing Analysis Microeconomics Course Assignment In fulfillment of Course ePortfolio and CSIS requirement Monopoly Profit Maximizing Analysis Part 2 QuesGons: Total Price Per Total Average Marginal Q1. Explain in your own words why MC=MR is a profit maximizing producGon level for the Monopoly Total Total Marginal A1- In a Monopoly mariginal cost = marginal revenue, in other words the difference in Output Unit Revenues Total Cost Revenue Costs (TC) Profit (TP) Cost (MC) the amount of money spend to produce or make the addiRonal product sold is equal to Units (Demand) (TR) (ATC) (MR) the difference in the amount of money made from selling it. For example, if it will cost 0 $8.00 $0.00 $10.00 ($10.00) -- the company $25 to produces five units and $29 to produce six but and they make $24 1 $7.80 $7.80 $14.00 ($6.20) $14.00 $4.00 $7.80 when they sell five units but they only make $26 when they sell six. The marginal cost is 2 $7.60 $15.20 $17.50 ($2.30) $8.75 $3.50 $7.40 $4 but the marginal revenue is only $2. So they would be spending more than they are 3 $7.40 $22.20 $20.75 $1.45 $6.92 $3.25 $7.00 making. 4 $7.20 $28.80 $23.80 $5.00 $5.95 $3.05 $6.60 Q2. Explain how the monopolist determines where to price his product A2- In a Monopoly they set the price where MC=MR, however their demand curve is 5 $7.00 $35.00 $26.70 $8.30 $5.34 $2.90 $6.20 only an esRmated demand since they have no compeRtors to base the demand on. 6 $6.80 $40.80 $29.50 $11.30 $4.92 $2.80 $5.80 They adjust their adjust their pricing to fit the demand once it is determined. 7 $6.60 $46.20 $32.25 $13.95 $4.61 $2.75 $5.40 Q3. A monopoly is considered an inefficient use of resources for what two reasons? 8 $6.40 $51.20 $35.10 $16.10 $4.39 $2.85 $5.00 A3- In a Monopoly they tend to produce less to keep the demand higher, allowing them 9 $6.20 $55.80 $38.30 $17.50 $4.26 $3.20 $4.60 to charge a higher price. They are not using all their resources available to produce the 10 $6.00 $60.00 $42.70 $17.30 $4.27 $4.40 $4.20 product. 11 $5.80 $63.80 $48.70 $15.10 $4.43 $6.00 $3.80 They also are not supplying enough to fulfill the actual demand, leaving the people 12 $5.60 $67.20 $57.70 $9.50 $4.81 $9.00 $3.40 unsasfied and maybe deterring the interest of potenRal clients. Demand Price $16.00 Monopoly Profit DeterminaGon $14.00 MC = MR $12.00 Average Total Costs $10.00 $8.00 Costs $6.00 Price Per Unit (Demand) Monopoly Profit $4.00 Marginal Cost (MC) Marginal Revenue (MR) $2.00 Price, Marginal Revenue, and Average Total Cost (ATC) $0.00 0 1 2 3 4 5 6 7 8 9 10 11 12 Output $80.00 Revenue - Cost Comparison $70.00 TR $60.00 TC $50.00 Total Revenues (TR) $40.00 $30.00 Total Costs (TC) $20.00 $10.00 Total Costs / Total Revenue $0.00 0 1 2 3 4 5 6 7 8 9 10 11 12 Output Monopoly Profit Maximizing Analysis.