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Graphs and Charts: Unit 2 - Assignment 4 - Web Problem One
Your completed table should look like this:
|
Q |
Price |
TR |
MR |
TC |
MC |
|
50,000 |
.10 |
$5,000 |
(.10) |
2,000 |
----- |
|
100,000 |
.09 |
$9,000 |
.08 |
5,500 |
.07 |
|
150,000 |
.08 |
$12,000 |
.06 |
10,000 |
.09 |
|
200,000 |
.07 |
$14,000 |
.04 |
15,000 |
.10 |
|
250,000 |
.06 |
$15,000 |
.02 |
22,000 |
.14 |
|
300,000 |
.04 |
$12,000 |
-.06 |
31,000 |
.18 |
We can enter .10 for the first MR entry (zero to $5,000 in TR and zero to 50,000 for Q). We have no initial entry for MC since FC are not known, so leave it blank.
The monopolist, using the MR = MC method, will produce 100,000 gallons per day and charge nine cents per gallon. If production is increased, then MR falls below MC.
What would be the profit maximizing level of output if this firm was participating in a perfectly competitive market structure? In pure competition, P = MR . At P = MR of nine cents, use MR = MC and the answer is 150,000 (.09 = .09).
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