Economics
posted by KEN on .
Willy's widgets, a monopoly, faces the following demand schedule (sales of widgets per month):
Price $20 30 40 50 60 70 80 90 100
Quantity 40 35 30 25 20 15 10 5 0
Calculate marginal revenue over each interval in the schedule (for example, between Q = 40 and Q=35). Recall that the revenue is the added revenue from an additional unit of production/sales and assume MR is constant within each interval.
If marginal cost is constant at $20 and total fixed cost is $100, what is the profit maximizing output level and price. Does the firm earn a profit or loss and how much is it?
Here's what I got...although I would doublecheck my work as I quickly input the data. After running a regression analysis, I got an inverse demand function of P = 100  2Q. MR = a + 2bQ and MC = 20. Therefore, equating MR and MC will provide the profitmaximizing quantity. Once the quantity is derived, input that number in the inverse demand function to get your profitmaiximizing price. The rest is down hill. Calculate total revenue, then subtract total costs from this to get profit. Again, doublecheck my work.

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