1. Poland Springs has the rights to the last source of fresh spring water. Therefore, they have...
Question:
1. Poland Springs has the rights to the last source of fresh spring water. Therefore, they have a monopoly in the market for fresh bottled water. Use the information in the below table to answer the following questions.
- What are the fixed costs in this situation?
- Use the numbers in the table to obtain the other values you need for profit maximization.
- What are the variable costs at each quantity?
- Sketch Poland Springs demand, marginal revenue, and marginal cost curves on the same graph and label the point of profit maximization.
- If the firm wants as many people as possible to have water, what price should it charge?
- To maximize total revenue, what price should be charged and how much quantity will be sold?
- Calculate Poland Springs? profit-maximizing level of output, price, and profit
- The building where the bottling occurs is owned by another company. If that company raises the rent by $15.50 per hour, what are the new profit-maximizing levels of output, price, and profit? *Hint: what type of cost is rent?
2. For the following two situations fully explain why the monopolist would increase or decrease output.
- Marginal Revenue exceeds Marginal Cost
- Marginal Cost exceeds Marginal Revenue