Use the table below to answer the following questions: Quantity Demand (Price) Marginal Revenue Marginal Cost Average
Question:
Use the table below to answer the following questions:
Quantity | Demand (Price) | Marginal Revenue | Marginal Cost | Average Cost |
1 | $1200 | 1200 | 500 | 500 |
2 | 1100 | 1000 | 275 | 388 |
3 | 1000 | 800 | 225 | 333 |
4 | 900 | 600 | 250 | 313 |
5 | 800 | 400 | 400 | 330 |
6 | 700 | 200 | 500 | 358 |
7 | 600 | 0 | 700 | 407 |
What is this firm’s profit-maximizing price? What is its profit-maximizing output?
What is the firm’s average profit? What is the firm’s total profit?
If at least one consumer is willing to pay $1200 for this product, why won’t the monopolist charge $1200?
Are there consumers who want the product but are not willing to pay the profit-maximizing price the firm will charge? How can you tell?
If the firm could charge every consumer exactly what that consumer was willing to pay (called perfect price discrimination), would the quantity the firm produced increase, decrease, or remain the same? Would the firm’s profits increase, decrease, or remain the same? Explain your answers.