Market Demand
Therefore, the monopolist sells _____ units at $ _____ per unit, and his/her total profit is approximately $____________.
After a given time period, due to investment and technological advances, which cost the monopolist an increase in TFC, results in a cost of production decrease to ATC2 and its corresponding supply to MC2. The monopolist, then, in the absence of price regulation by the government, would like to produce _______ units and charge a unit price of $__________.
However, due to quality improvements and effective advertising, the demand increases to D2, while its corresponding marginal revenue is MR2, with ATC2 and MC2 remaining unchanged. The monopolist, therefore, produces and sells approximately ______ units at $_______ per unit. His/her total profit is now approximately $___________.
Please let me provide some help on your Week 6 assignment.
Let me try to provide more help. Start with the discussion on pages 209-212. Exhibit 1 is the key. The profit maximizing Output and Price depend on the intersection where MR = MC. This was also discussed in the previous chapter using exhibits 1 & 2 to help understanding. All profit maximizing firms begin from this MR = MC point. Then, as shown in Exhibit 1 on page 210, draw a vertical line down to the horizontal axis to locate Quantity, and up to the demand curve to locate Price. Price is point A on the demand curve. Since total profit is TR – TC, or P x Q at point A and total cost is point B x Q on the ATC curve, profit is as indicated.
For your assignment, part 1, your vertical line at MR 1 = MC 1, hits Quantity at about 8 units and price at about $25. So, TR = $25 x * = $200 and since ATC 1 crosses this same line at about $13, then TC = 8 x $13 = $104.
For part 2, just remember that the costs have changed so locate the intersection of MR 1 and MC 2 to begin. The marginal revenue and demand curves have not changed.
For part 3, it is MR 2 = MC 2 to begin. The demand curve is now D 2.
Does this help?
