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Question

The market demand curve for a commodity and the total cost for a monopoly firm producing the commodity is given by the schedules below. Use the information to calculate the following :

Quantity012345678Price524437312622191613

Quantity012345678Price106090100102105109115125

(i) The MR and MC schedules.

(ii) The quantities for which MR and MC equal.

(iii) The equilibrium quantity of output and the equilibrium price of the commodity

(iv) Total revenue, total cost and total profit in equilibrium


Solution

(i)

(ii) At 6 units, MR = MC

(iii) When MR = MC (i.e., equilibrium), Equilibrium Quantity = 6 units and Equilibrium Price = Rs 19

(iv) Total profits in equilibrium = TR - TC

                                                = Rs 114 - Rs 109 = Rs 5

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