Purchase Solution

fixed costs of the monopolist

Not what you're looking for?

Ask Custom Question

2) A monopolist faces the following demand function for its product:

Q = 45 - 5P

The fixed costs of the monopolist are $12 and the monopolist incurs variable costs of $5.00 per unit.

a) What is the profit-maximizing level of price and quantity for this monopolist? What will profits be at this price and output level?
b) If the government imposes a franchise tax on the firm of $10, what will be the profit-maximizing level of price, output, and profits?
c) If the government imposes an excise tax of 50 cents per unit of output sold, what is the impact on the profit-maximizing level of price, outputs and profits?
d) If the government imposes a ceiling of $6 on the price of the firm's product, what output will the firm produce and what will be total profits?

Purchase this Solution
Solution Summary

The fixed costs of the monopolist are examined.

Solution Preview

a)
MC=constant Variable cost=$5.00
For MR, we have TR = P*Q=(45-Q)/5*Q
MR=dTR/dQ=9-0.4Q
Equating the two we get 9-0.4Q=5
Solving we get ...

Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

View More Free Quizzes
Related BrainMass Solutions

  • Oligopoly, Monopoly, Competitive Markets and Firm Costs

    When price is greater than average fixed costs (the opposite of the statement made), the firm is able to meet costs, or at least their fixed costs.

  • Short Run Price and Output Determination

    297813 Short Run Price and Output Determination by a Monopolist Starting from Figure 8-6 showing the short-run price and output determination by the monopolist, suppose that the average fixed costs of the monopolist increase by $5 and that its AVC is

  • Total Fixed Costs

    So, It is in interest of the monopolist to continue production despite it is making losses in the current situation. Total Fixed Costs are calculated in the case.

  • Monopolist demand function - One and Only Inc.

    Thanks This solution calculates fixed costs, total revenues, marginal revenues and profit maximizing decisions for a monopolist.

  • Monopolist's demand function

    In short run, since monopolist cannot avoid the fixed costs, Monopolist should shut down only when the P < AVC Solve for P=VC VC is the variable part of the TC.

  • variable costs and fixed costs

    An overview of variable costs and fixed costs with discussion of its relevance in monopoly and competition.

  • Contribution Margin

    No, he cannot do that because demand is always a downward sloping curve, it the firm sets the price very high, because of the less demand, the total revenue may not cover the total fixed costs.

  • Need to solve the following problem

    is the result of mismeasurement of opportunity costs. d. occur when per unit costs increase as one input is added to production. 12.

  • Graphical solution of monopoly output decision

    Showing the short run price and output determination by the monopolist, suppose that the average fixed costs of the monopolist increase by $5 and that its AVC is $6 less that the new ATC at the best level of output. a).

View More Related Solutions