Table 15-1
The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes.Table 15-1 shows the cost and demand data for this government protected monopolist.
-Refer to Table 15-1.What is the amount of profit that the firm earns?

Question

Table 15-1
  The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes.Table 15-1 shows the cost and demand data for this government protected monopolist.
-Refer to Table 15-1.What is the amount of profit that the firm earns?

Quizplus · Accepted Answer

Profit is calculated as total revenue minus total costs. To maximize profit, the firm should produce the quantity where marginal revenue (MR) equals marginal cost (MC). In this case, that quantity is 6, where MR=$33 and MC=$27. The total revenue at a quantity of 6 is $198, and the total cost is $99 ($27 x 4 + $21 x 2 + $15 x 1). Therefore, the profit is $99 - $49.50 (half of fixed costs) = $49.50. Rounded to the nearest whole dollar, the answer is $49.

Table 15-1 the Government of a Small Developing Country Has