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The table below shows the demand schedule of a monopolist Calculate marginal revenue and fill in...

Question:

The table below shows the demand schedule of a monopolist. Calculate marginal revenue and fill in the revenue column in the table. Assume that output can only be sold in integer amounts 1 unit, 2 units, etc. Once you've filled in marginal revenue, identify the quantity produced by the monopolist in this market.

Quantity Price Marginal Cost Marginal Revenue
1 $13 $6
2 $12 $7
3 $11 $8
4 $10 $9
5 $9 $10
6 $8 $11

How units does Number many the monopolist produce? _____Units

Monopolist Profit Maximization:

Profit maximization is a microeconomics concept that firm uses to fix price, output and inputs that give the greatest profit. Monopoly is the sole producer or seller in the whole market and therefore, he/she maximizes profit by producing where marginal revenue equals marginal cost and price is exactly above the profit maximizing output on the demand curve.

Answer and Explanation:

The monopolist will produce 3 units of output and sell at $11 each. This is because marginal revenue is approximately equal to marginal cost at 3 units. Total revenue is price times quantity. Marginal revenue is extra revenue gained as a result of selling additional unit of output.

Quantity Price ($) Marginal cost Total revenue Marginal revenue
1 13 6 13 _
2 12 7 24 11
3 11 8 33 9
4 10 9 40 7
5 9 10 45 5
6 8 11 48 3

Learn more about this topic:

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Natural Monopoly in Economics: Definition & Examples

from Intro to Business: Help and Review

Chapter 3 / Lesson 13
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