Suppose you own the only company which provides monthly interest subscription in

Question

Suppose you own the only company which provides monthly interest subscription in a certain town. Fill out the table below. If you want to maximize profits, what price should you charge, and how many internet subscriptions should you sell per month? How much profit will you make? Suppose the local government in your town imposes a flat $15 per month tax on internet service on firms. What price should you charge now, and how many subscriptions should you sell per month? What will be your profits after the tax?

Explanation / Answer

So, Monopoly will produce till MR = MC

So, Will Produce

   Q = 5

Price = 14

2.

   Profit = TR - TC = P*Q - TC = 70 - 45 = 25

3.   A tax of $15

    So, New MC = MC + 15

So , new price = 18 and new Q = 3

New profit = TR - new TC = 54 -50 = 4

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output Price TC ATC MC TR MR 2 20 33 16.5 33 40 40 3 18 35 11.66667 2 54 14 4 16 39 9.75 4 64 10 5 14 45 9 6 70 6 6 12 55 9.166667 10 72 2 7 10 70 10 15 70 -2

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