Individual presentation 8

Name: Phan Thi Phuong Thao

Class: EBDB 4
ID: 11225967
Problem 1. The following table shows the demand & cost data for a monopolist:
a, Complte the table:
 We have :
o TR = P× Q
o MR = Δ TR / Δ Q= TR’(q)
o ATC =TC/Q
o MC = Δ TC/ Δ Q= TC’(q)

Quantity Price $ Total Marginal Total cost Average Marginal

revenue revenue $ total cost cost
$ $
0 8.5 0 5
1 8.0 8 8 9 9 4
2 7.5 15 7 11.5 5.75 2.5
3 7.0 21 6 12.5 4.167 1
4 6.5 26. 5 13.5 3.375 1
5 6.0 30 4 14.0 2.8 0.5
6 5.5 33 3 16.0 2.66 2
7 5.0 35 2 20.0 2.857 4
8 4.5 36 1 25.0 3.125 5
9 4.0 36 0 32.0 3.55 7
10 3.5 35 -1 40.0 4 8

b. What quantity will the monopolist produce?

- The monopolist will produce the quantity at maximum profit  MR=MC
=> Q*=6
c. What price will the monopolist charge?
When Q*=6, the profit will be maximized. The monopolist will charge the
price P=5.5

d. What will the profit be at this price?

At the price P=5.5, profit will be:

π = Q* (P* - ATC* ) = 6 ( 5.5 – 2.67 ) = 16.98$

Problem 2: A firm has demand function of P=100-Q ($) and total cost function of
TC=500+ 4Q+Q^2 ($)
a. Is this firm a perfect competitive firm? Why?
 Method 1 :
o We have : TR = P × Q = ( 100 – Q ) × Q = -Q2 + 100Q
o MR = ( TR )’ = 100 – 2Q
o So MR < P
 Imperfectly competitive .

 Method 2 :
o If the firm is perfectly competitive, we have a perfectly elastic
Demand curve (Horizontal).
o But we have D: P = 100 – Q
 Slope down D
 Imperfectly competitive.

b. What is price and quantity to maximize total revenue ? What is that

maximum total revenue ?
TR max  MR = 0
  100 – 2Q = 0 => Q = 50
P = 100 – Q = 100 – 50 = 50
At P=50 and Q=50, the total revenue is maximum:
TR = P.Q = 50.50 = 2500
 When price is 50 $ and quantity is 50, the maximum total revenue is
2500 $

c. What is price and optimal quantity to maximize profit? What is that

maximum total profit ?
MR = (TR)’ = 100 – 2Q
MC = (TC)’ = 4 + 2Q
To maximize the total profit: MR = MC
 100 – 2Q = 4 + 2Q
 Q = 24
At Q*= 24, we have P*= 100 – 24 = 76
TR = 100.24 – 24^2 = 1824
TC = 500 + 4.24 + 24^2 = 1172
So the maximum total profit is: TR – TC = 1824 – 1172 = 652
 When price is 76 $ and optimal quantity is 24, the maximum total profit
is 652 $

d. Assume government imposes a tax of 8 $ per unit of good sold, what is

price and optimal quantity that gives the firm maximum profit? What is
this maximum profit?
- After government imposes a tax of 8 $ per unit of good sold. The total
cost will be : TC = 500 + 4Q + Q^2 + 8Q = 500 + 12Q + Q^2
We have: MR = 100 – 2Q
MC = (TC)’ = 12 + 2Q
- To maximize the total profit: MR = MC
 100 – 2Q = 12 + 2Q
 Q = 22
At Q*= 22, we have P*= 100 – 22 = 78
TR = 100.22 – 22^2 = 1716
TC = 500 + 12.22 + 22^2 = 1248
So the maximum total profit is: TR – TC = 1716 – 1248 = 468
  When government imposes a tax of 8 $ per unit of good sold, the price
is 78 $ ,quantity is 22 and the maximum profit is 468 $

e. Asume government imposes a fixed tax of 100 $, what is price and

optimal quantity that gives the firm maximum profit?
- After government imposes a fixed tax of 100 $,
TC = 500 + 4Q + Q^2 +100 = 600 + 4Q + Q^2
We have: MR = (TR)’ = 100 – 2Q
MC = (TC)’ = 4 + 2Q
To maximize the total profit: MR = MC
 100 – 2Q = 4 + 2Q
 Q = 24
At Q*= 24, we have P*= 100 – 24 = 76
TR = 100.24 – 24^2 = 1824
TC = 600 + 4.24 + 24^2 = 1272
So the maximum total profit is: TR – TC = 1824 – 1272 = 552
 When government imposes a fixed tax of 100 $, the price is 76
$,quantity is 24 and the maximum profit is 552 $