Solutions & Discussion
Problems and Exercises:
Unit Two: Assignment 4: Web Problem U2-A4-P1
The following schedule applies to Dust Town Water Company, a local monopoly located in Desert City.
|
Output: gallons per day |
Price |
TR |
MR |
TC |
MC |
|
|
50,000 |
.10 |
|
|
$2,000 |
------ |
|
|
100,000 |
.09 |
|
|
$5,500 |
|
|
|
150,000 |
.08 |
|
|
$10,000 |
|
|
|
200,000 |
.07 |
|
|
$15,000 |
|
|
|
250,000 |
.06 |
|
|
$22,000 |
|
|
|
300,000 |
.04 |
|
|
$31,000 |
|
TR = P x Q;
MR = change in TR divided by change in Q (note that each Q change = 50,000)
MC = change in TC divided by change in Q (50,000);
Now fill in the table and determine the profit-maximizing level of output. Use the MR = MC method.
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