Monopoly Profit Maximization Worksheet
A monopolist has the following total cost data and demand schedule:
Output
(units)
Price ($)
Total
Cost ($)
TR
MR
0
1
2
3
4
5
6
7
8
9
10
11
12
12
11
10
9
8
7
6
5
4
3
2
1
0
5
10
15
20
25
30
35
40
45
50
55
60
65
0
11
20
27
32
35
36
35
32
27
20
11
0
X
11
9
7
5
3
1
-1
-3
-5
-7
-9
-11
a. Find the profit maximizing quantity, price and profit.
Note that MC=$5 at all levels of output.
Set MR=MC=5 and we find Q=4. P=$8 and Profit = $8*4 – 25 = $7
b. Suppose that total fixed cost increases by $1. Find the profit maximizing quantity, price and profit.
If TFC increases, this does not change the MC=5 in the table above. So the firm will still produce Q=4 and
P=$8. However profit is one dollar lower and now equal to $6.