Question
Asked Dec 11, 2019
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The above table provides some data for a monopoly firm. What is the profit maximizing point of production for this firm? Assume that the firm can only produce and sell whole units (discrete case).

Price

Quantity Demanded

Total Cost

$40

1

$270

35

2

280

30

3

295

25

4

320

20

5

360

A. 1

B. 2

C. 3

D. 4

E. 5

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Expert Answer

Step 1

Answer - The profit maximizing condition for monopolies are where marginal revenue (MR) is equal to marginal cost (MC) . If monopoly produces a lower quantity , than MR> MC at those levels of output, the firm can make higher profits by expanding output . If firm produces at a greater quantity, MC >MR , and the firm can make higher profits by reducing its quantity of output.
Now, from the table-

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P Q TC R(R=P*Q) MR MC 40 1 270 40 35 2 280 70 30 10 30 3 295 90 20 15 100 25 4 320 25 10 360 100 20 5 40

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Step 2

From the table there is no pint where MR = MC . In that case Firm will produce upto the point where...

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