Big Top is the only circus in the nation. The table sets out the demand schedule

Question

Big Top is the only circus in the nation. The table sets out the demand schedule for circus tickets and the cost schedule for producing the circus Calculate Big Top's profit-maximizing price, output and economic profit if it charges a single price for all tckets. Quantity Price (dollars per Total cost (dollars per per show) show) ticket 20 18 16 14 12 10 1,000 1,600 2,200 2,800 3,400 4,000 4,600 5,200 5,800 100 Big Top's profit-maximizing output is tickets a show. Big Top's profit-maximizing price is S atiket. 300 400 500 600 700 800 > Answer to 2 decimal places When Big Top produces the profit-maximizing output and charges the profit-maximizing price, economic profit is S >>> If the firm inours an economic loss, indicate the loss with a minus sign, If the firm makes an economic profit, do not include a plus sign.

Explanation / Answer

Since there is only one circus in the country it can act as a monopolist and a monopolist is in equilibrium when Marginal revenue(MR)=Total revenue(TR).

MR=TR=600 at price 12 and output 400.Therefore,this is the profit maximizing level of price and output.

Profit maximizing price=12

Output=400

Profit=TR-TC=4800-3400=1400

TR=P*Q

MR=Change in TR/Change in output

MC=Change in total cost/change in output

Price Quantity TC MC TR MR 20 0 1000 - 0 - 18 100 1600 600 1800 1800 16 200 2200 600 3200 1400 14 300 2800 600 4200 1000 12 400 3400 600 4800 600 10 500 4000 600 5000 200 8 600 4600 600 4800 -200 6 700 5200 600 4200 -600 4 800 5800 600 3200 -1000

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