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# A Monopoly Firm Has a Total Fixed Cost of Rs 100 and Has the Following Demand Schedule: - Economics

ConceptSimple Monopoly in the Commodity Market

#### Question

A monopoly firm has a total fixed cost of Rs 100 and has the following demand schedule:

 Quantity 1 2 3 4 5 6 7 8 9 10 Price 100 90 80 70 60 50 40 30 20 10

Findthe short run equilibrium quantity, price and total profit. What would be the equilibrium in the long run? In case the total cost is Rs 1000, describe the equilibrium in the short run and in the long run.

#### Solution

 Quantity (Q) Price (P)(Rs ) TR =P × Q (Rs ) TFC TVC TC Total Profit = TR − TC 1 100 100 100 0 100 0 2 90 180 100 0 100 80 3 80 240 100 0 100 140 4 70 280 100 0 100 180 5 60 300 100 0 100 200 6 50 300 100 0 100 200 7 40 280 100 0 100 180 8 30 240 100 0 100 140 9 20 180 100 0 100 80 10 10 100 100 0 100 0

Let the total variable cost of the monopolist firm is zero. Now, the profit will be the maximum where TR is maximum. That is, at the 6th unit of output the firm will be maximising its profit and the short run equilibrium price will be Rs 50.

Profit = TR − TC

= 300 − 100

Profit = Rs 200

If the total cost is Rs 1000, then the equilibrium will be at a point where the difference between TR and TC is the maximum.

TR is the maximum at the 6th level of output.

So profit = 300 − 1000

= −700

So, the firm is earning losses and not profit. As the monopolist firm is incurring losses in the short run, it will stop its production in the long run.

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Solution A Monopoly Firm Has a Total Fixed Cost of Rs 100 and Has the Following Demand Schedule: Concept: Simple Monopoly in the Commodity Market.
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