Scenario 10.8:
Adriana is a monopolist producing green calculators. The average and marginal cost curves and average and marginal revenue curves for her product are given as follows:
AC = Q + (10,000/Q) MC = 2Q AR = 30 - (Q/2) MR = 30 - Q
-Refer to Scenario 10.8. Suppose that the regulatory agency sets your price where average revenue equals average cost. How much profit will Adriana make?

Question

Quizplus · Accepted Answer

When the regulatory agency sets the price where average revenue equals average cost, it means that price = AC = Q + (10,000/Q). Solving for Q, we get Q = 100. This means that Adriana will produce 100 green calculators.

At this output level, her average cost will be AC = Q + (10,000/Q) = 100 + (10,000/100) = $200 per calculator.

Also, her price will be P = AR = 30 - (Q/2) = 30 - (100/2) = $20 per calculator.

Therefore, her total revenue will be TR = P x Q = $2,000.

Her total cost will be TC = AC x Q = $20,000.

Her profit will be TR - TC = -$18,000. This means that she will break even and not make any profit.

Scenario 10.8: Adriana Is a Monopolist Producing Green Calculators. the Average and Average