Tecky Corp is a monopoly in the market of product Y. Suppose you are the marketing managerof Tecky Corp. You have gathered some information about product Y and the cost of Tecky Corp.as shown in the table below.Total cost $Unit Price $Total revenue $Quantity30016806804305601,1205924401,320379243701,4801,0241,4002801,3041,2602101,6261,0501502,0251008002,432You are in a meeting with the CEO of Tecky Corp. The CEO asks the following questionA.during the meeting:"We should be able to get more revenue as we sell more units. I see the total revenue risesfrom the quantity of 1 to 4. However, why does the total revenue start falling from thequantity of 5 onward?"Explain to the CEO why this is the case. Determine Tecky Corp.'s quantity of output at which the total surplus (consumer surplus +B.producer surplus) is maximized. Explain your answer.C.The CEO of Tecky Corp. makes the following statement before the end of the meeting:"I have heard about deadweight loss created by monopoly firms. Does our company alsocreate deadweight loss? If so, how much is the deadweight loss in terms of dollar amount?"Answer the CEO's question. Explain your answer.

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Asked Dec 17, 2019
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Tecky Corp is a monopoly in the market of product Y. Suppose you are the marketing manager
of Tecky Corp. You have gathered some information about product Y and the cost of Tecky Corp.
as shown in the table below.
Total cost $
Unit Price $
Total revenue $
Quantity
300
1
680
680
430
560
1,120
592
440
1,320
3
792
4
370
1,480
1,024
1,400
280
1,304
1,260
210
1,626
1,050
150
2,025
100
800
2,432
You are in a meeting with the CEO of Tecky Corp. The CEO asks the following question
A.
during the meeting:
"We should be able to get more revenue as we sell more units. I see the total revenue rises
from the quantity of 1 to 4. However, why does the total revenue start falling from the
quantity of 5 onward?"
Explain to the CEO why this is the case.
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Tecky Corp is a monopoly in the market of product Y. Suppose you are the marketing manager of Tecky Corp. You have gathered some information about product Y and the cost of Tecky Corp. as shown in the table below. Total cost $ Unit Price $ Total revenue $ Quantity 300 1 680 680 430 560 1,120 592 440 1,320 3 792 4 370 1,480 1,024 1,400 280 1,304 1,260 210 1,626 1,050 150 2,025 100 800 2,432 You are in a meeting with the CEO of Tecky Corp. The CEO asks the following question A. during the meeting: "We should be able to get more revenue as we sell more units. I see the total revenue rises from the quantity of 1 to 4. However, why does the total revenue start falling from the quantity of 5 onward?" Explain to the CEO why this is the case.

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Determine Tecky Corp.'s quantity of output at which the total surplus (consumer surplus +
B.
producer surplus) is maximized. Explain your answer.
C.
The CEO of Tecky Corp. makes the following statement before the end of the meeting:
"I have heard about deadweight loss created by monopoly firms. Does our company also
create deadweight loss? If so, how much is the deadweight loss in terms of dollar amount?"
Answer the CEO's question. Explain your answer.
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Determine Tecky Corp.'s quantity of output at which the total surplus (consumer surplus + B. producer surplus) is maximized. Explain your answer. C. The CEO of Tecky Corp. makes the following statement before the end of the meeting: "I have heard about deadweight loss created by monopoly firms. Does our company also create deadweight loss? If so, how much is the deadweight loss in terms of dollar amount?" Answer the CEO's question. Explain your answer.

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Expert Answer

Step 1

A.

From the table given above, it can be interpreted that the maximum profit that Tecky Corp. can earn is $1480 by selling 4 units of output. However, after this the revenue starts declining as the decrease in price is more responsive than an increase in quantity which reduces the profit level of the Tecky Corp. Furthermore, being a manager, I would suggest the Corp. to produce 4 units of output only as at 4th unit Profit is $456 ($1480 - $1024) whereas at 5th unit of output profit is $96 ($1400 – 1304). Hence, profit of monopolist (Tecky Corp.) declines by producing more, that is, 5th unit.

Step 2

B.

The surplus of Tecky Corp. is maximized by producing 2 units of output as at that level the surplus is total revenue minus total cost which ...

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Quantity Unit price Total revenue Total Cost Surplus 300 300 680 680 430 250 1120 528 2. 560 592 440 1320 792 528 456 4 370 1480 1024 1400 96 280 1304 210 1260 1626 -366 150 1050 2025 -975 -1632 100 800 2432

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