Suppose a firm has a monopoly on the production of paraffin candles and faces the demand and cost situation shown in the following table.

a. Fill in the missing values in the table.

b. If the firm wants to maximize its profit, what price should it charge and how many paraffin candles should it sell? How much profit (or loss) it will make?

c. Using the model shown in Figure 15.3, draw a graph to illustrate your answer to part (b).

d. Suppose the government imposes a tax of $5 per month. Now what price should the firm charge, how many paraffin candles should it sell, and what will its profit (or loss) be?

e. Suppose the government raises the tax to $25 per month. Based on your answer in part (d), briefly explain if the firm’s decisions would be different in the short run than in the long run.

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Price $100 95 90 85 80 75 Quantity Per Month Total Marginal Total Marginal (Unit) Revenue Revenue Cost Cost 10 $1,010 11 1,040 12 1,065 13 1,085 14 1,100 15 1,110