The following table shows the different quantities sold by a monopolist at different prices

Question

Quantity (units) Price ($)
1,000 14
1,350 12
1,700 10
2,100 8
2,650 6
3,000 4
3,300 2

a) Estimate the total revenue and marginal revenue of the monopolist at the different quantities.
b) If the monopolist faces a constant marginal cost of $2.29, what is the optimal output it should produce?

Answer 1

a) The total revenue and marginal revenues of the monopolist are calculated in the following table.

Quantity (units) Price ($) Total Revenue ($) Marginal Revenue ($)
1,000 14 14,000 -
1,350 12 16,200 6.29
1,700 10 17,000 2.29
2,100 8 16,800 -0.5
2,650 6 15,900 -1.64
3,000 4 12,000 -11.14
3,300 2 6,600 -18

b) The optimal output of a monopolist is achieved at a point where the marginal revenue equals marginal cost. Because the marginal cost is $2.29, the monopolist should produce 1,700 units of its product.