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The Market Demand Curve for a Commodity and the Total Cost for a Monopoly Firm Producing the Commodity is Given in the Schedules Below. - Economics

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ConceptSimple Monopoly in the Commodity Market

Question

The market demand curve for a commodity and the total cost for a monopoly firm producing the commodity is given in the schedules below.

Quantity

0

1

2

3

4

5

6

7

8

Price

52

44

37

3

26

22

19

16

13

 

Quantity

0

1

2

3

4

5

6

7

8

Total Cost

10

60

90

100

102

105

109

115

125

Use the information given to calculate the following:

(a) The MR and MC schedules

(b) The quantities for which MR and MC are equal

(c) The equilibrium quantity of output and the equilibrium price of the commodity

(d) The total revenue, total cost and total profit in the equilibrium

Solution

(a)

Quantity

(units)

Price/AR (Rs )

TR = P × Q (Rs )

MR = TRn − TR− 1

(Rs )

TC (Rs )

MC = TCn − TC− 1 (Rs )

0

52

0

10

1

44

44

44

60

50

2

37

74

30

90

40

3

31

93

19

100

10

4

26

104

11

102

2

5

22

110

6

105

3

6

19

114

4

109

4

7

16

112

−2

115

6

8

13

104

−8

125

10

(b) MR equals MC at the 6th unit of output.

(c) At equilibrium, MR equals MC, and here MR equals MC at the 6th unit of output, where MC is upward sloping. Thus, the equilibrium price is Rs 19.

(d) TR = Rs 114

TC = Rs 109

Total profit = TR − TC

= Rs 114 − 109

= Rs 5

  Is there an error in this question or solution?

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Solution The Market Demand Curve for a Commodity and the Total Cost for a Monopoly Firm Producing the Commodity is Given in the Schedules Below. Concept: Simple Monopoly in the Commodity Market.
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