Worked Problems

Suppose a monopoly's demand schedule is given by the first two columns of the following table. Its total cost of production is given in the next column.

Output	Price	Total Cost	Total Revenue	MC	MR
0	$ 24	$ 10
1	21	14
2	18	20
3	15	28
4	12	38
5	9	50

Fill in the next column by computing the firm's total revenue associated with each output level.
By comparing total cost and total revenue, find the output level that maximizes the firm's profit.
What price should the firm set to achieve maximum profit?
Complete the final two columns to verify that the same conclusions are reached using the MR = MC rule.

Suppose a price discriminating monopoly has segregated its market into two submarkets, and can prevent resale between the two. Assume that its marginal cost is constant and equal to its average total cost of $8. The firm's demand schedule for the first group is given by the first two columns of the following table.

Output	Price	Total Revenue	MR
0	$ 24
1	22
2	20
3	18
4	16
5	14
6	12
7	10
8	8

Find the firm's total revenue schedule for this submarket, entering the data into the table where indicated. Use these data to determine the marginal revenue schedule in this submarket.
What output level and price will maximize the firm's profit in this submarket?
The firm's demand schedule for the second group is given by the first two columns of the following table.
Output Price Total Revenue MR
0 $ 33
1 30
2 27
3 24
4 21
5 18
6 15
7 12
8 9
Find the firm's total and marginal revenue schedules in this second submarket. What output level and price will maximize the firm's profit in this submarket?
Based on these prices, which submarket has the more elastic demand?
What is this firm's total economic profit?

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