This firm will produce units of output and set price equal to . Assuming the fir

Question

This firm will produce units of output and set price equal to . Assuming the firm chooses the profit-maximizing level of output, its marginal cost will equal $ , average total cost will equal , average fixed cost will equal $ , and marginal revenue will equal $ . The firm's total revenue will equal $ and total cost will equal $ . The firm's profit is equal to $ . Assuming no externalities, the deadweight loss created by this monopoly is approximately equal to $ (shade the area corresponding to deadweight loss).

Explanation / Answer

For a monopoly seller, equilibrium is attained at the level at which MR = MC

Thus,

1) The firm will produce 15 units of output as at this level, MR = MC.

2) Price will be set as $ 10 (Price at which MR = MC)

3) MC at 15 units will be $ 10

4) ATC at 15 units will be $ 16

5) At 15 untis, ATC will be $ 16, AVC will be $ 10.

ATC = AFC + AVC

$ 16 = AFC + $ 10

AFC = $ 6

6) MR will be equal to $ 10

7) TR = Price * Quantity

TR = 10 * 15

TR = $ 150

8) TC = ATC * Quantity

TC = 16 * 15

TC = $ 240

9) Profit = TR - TC at 15 units

Profit = $ 150 - $ 240

Profit = - $ 90 (Loss)

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