Economics Monopoly Pricing

Monopoly

1. A monopolist faces the following demand schedule. Compete the rest of the table, and

answer the following questions below.

Quantity  Price conswilling to pay  Total Revenue MR Total Cost MC ATC Profit

0                                                                                          40

1                          100                                                          15

2                           80                                                           10

3                          60                                                            20

4                          40                                                            35

5                          20                                                            45

a) Draw demand, MR, MC and ATC corresponding to this monopolist’s production. What

condition must be met for profit maximization? Label the profit maximizing price and quantity.

Also shade the area of economic profits. (2 points)

b) What is the value of economic profit for the monopolist when it chooses the profitmaximizing

equilibrium? (2 points)