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2317638041's Question
Microeconomics
Posted 8 months ago
1:Determine the monopolist’s profit maximising price and quantity. Calculate the profit/loss at this price and quantity. 2:The monopolist decides to restrict output to 200 units. Determine the price at this level of output. Use this information to ca

1. The following graph has been provided for a monopolist.

Use the above information to complete exercises 2.1. - 2.4.
1.1. Determine the monopolist's profit maximising price and quantity. Calculate the profit/loss at this price and quantity.
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Answer from Sia
Posted 8 months ago
Solution
a
Identify the profit-maximizing quantity: The monopolist maximizes profit where MR=MCMR = MC. From the graph, this occurs at the point where the MR and MC curves intersect. This intersection happens at an output level of approximately 300 units
b
Determine the profit-maximizing price: To find the price, we look at the demand curve (AR) at the profit-maximizing quantity. At 300 units, the price on the AR curve is approximately $2.00
c
Calculate total revenue: Total revenue (TR) is calculated as P×QP \times Q. At the profit-maximizing quantity and price, TR=2.00×300=600TR = 2.00 \times 300 = 600
d
Calculate total cost: Total cost (TC) is calculated as ATC×QATC \times Q. From the graph, the ATC at 300 units is approximately 1.251.25. Therefore, TC=1.25×300=375TC = 1.25 \times 300 = 375
e
Calculate profit: Profit is calculated as TR−TCTR - TC. Therefore, profit = 600−375=225600 - 375 = 225
Answer
The monopolist's profit-maximizing price is 2.00,andtheprofit−maximizingquantityis300units.Theprofitatthispriceandquantityis2.00, and the profit-maximizing quantity is 300 units. The profit at this price and quantity is 225.
Key Concept
Profit maximization for a monopolist occurs where marginal revenue equals marginal cost.
Explanation
By identifying the intersection of the MR and MC curves, we determine the profit-maximizing quantity. The corresponding price on the demand curve (AR) gives us the profit-maximizing price. Total revenue and total cost calculations allow us to find the profit.

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