Chapter Fifteen

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UGI105 HW11 Monopoly Answers (1)

Quantity Price T otal Cost T otal Revenue

Quantity	Price	Total Cost	Total Revenue
Profit
0	$145	$20
1	$ 125	$115
2	$115	$200
3	$103	$275
4	$93.50	$340
5	$85	$395
6	$77.50	$440

a. What is the profit maximizing level of output?

b. What price will the monopolist set?

ANS
The completed table should look like the one below.

Quantity	Price	T otal Cost	T otal Revenue	Profit
0	$145	$20	$0	–$20
1	$125	$ 115	$ 125	$10
2	$115	$200	$230	$ 30
3	$ 104	$ 275	$ 312	$ 37
4	$93.50	$ 340	$ 374	$34
5	$85	$ 395	$ 425	$30
6	$77.50	$440	$465	$15

a. The monopolist should produce 3 units of output to maximize output.
b. The monopolist should charge a price of $104.

5. Refer to the graph below that represents a monopolistically competitive firm to answer the following questions.

a . What is the profit-maximizing level of output? What price will it charge?

b . Is this monopolistically competitive firm in long-run equilibrium? Why or why not?

ANS:
a. This firm would sell 200 units at a price of $20 apiece.

b. Yes, because monopolistically competitive firms earn zero economic profit in the long run, and this firm is earning zero economic profit (P = ATC).

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