10-2 a-c Monopoly firm

550

500

450
Demand
400

350 Marginal
Price per unit

Revenue
300
Pe
250

200
Profit = $4,000
150 ($200 x 20)
Supply =MC
100

50

0 Qe
0 5 10 15 20 25 30 35 40 45 50
Units per day

1. The firm will produce 20 units per day.

2. It will charge a price of $300 per unit.

3. Its revenue per day is $6,000. Its total cost is $2,000 per day, and its profit is

$4,000 per day.

4. The tax is a kind of license fee; it does not affect marginal cost. It therefore
does not affect the firm's profit-maximizing price.
 10-2 d Monopoly firm
550

500

450
Demand
400

350
Price per unit

Pe
300
Tax = $1,000
250

200
Net Profit = $3,000
150 ($200 x 20) - tax
Supply = MC
100
Marginal
50
Revenue
0
Qe
0 5 10 15 20 25 30 35 40 45 50
Units per day

5. Output would remain unchanged.

6. Profit per day would fall to $3,000 per day.

7. Price will rise to $350 per unit.

 10-2 g-i Monopoly firm
550

500

450
Demand
400
Pe
350
Price per unit

300

250 Profit = $2,250

($150 x 15) Supply = MC
200

150

100
Marginal
50
Revenue
0 Qe
0 5 10 15 20 25 30 35 40 45 50
Units per day

8. The profit-maximizing output will fall to 15 units per day.

9. Total revenue now equals $5,250 per day. Total cost equals $3,000 per day.
Profit equals $2,250 per day.