Scenario: Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. To answer the questions below, it is useful to know that the equation of the (inverse) demand curve is P = 8 - 0.04Q, where Q is the quantity demanded (in millions of packs) and P is the price per pack (in $). Also, you should draw in the marginal revenue curve.

-Refer to the scenario above.If the quantity sold is 100 million packs,then the firm's total revenue is ________ and the total cost is ________.

Question

Scenario: Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. To answer the questions below, it is useful to know that the equation of the (inverse) demand curve is P = 8 - 0.04Q, where Q is the quantity demanded (in millions of packs) and P is the price per pack (in $). Also, you should draw in the marginal revenue curve.
 
-Refer to the scenario above.If the quantity sold is 100 million packs,then the firm's total revenue is ________ and the total cost is ________.

Quizplus · Accepted Answer

Total revenue is calculated as price per unit times quantity sold. If the price per unit is $4 (from the scenario not provided here but inferred from the answer options) and 100 million packs are sold, then total revenue = $4 * 100 million = $400 million. Total cost is given as $250 million in option A, which must be derived from the scenario's details.