Statistics Solutions

[Solution] A monopoly cigarette producer charges a price of $1 per pack. Assuming that the monopoly is maximizing profits and the price elasticity of demand

Question:

  1. A monopoly cigarette producer charges a price of $1 per pack. Assuming that the monopoly is maximizing profits and the price elasticity of demand for cigarettes is -2 at that price; calculate the monopolist's marginal revenue and marginal cost. Explain why the monopolist will never sell enough cigarettes to allow demand to become inelastic.
  2. You are a self-employed profit-maximization consultant specializing in monopolies. Four firms are currently seeking your advice, and although the information they have supplied to you is incomplete, your expert knowledge allows you to go back and make a definite recommendation in each case. Select (with your explanation) one of the following recommendations for each firm in the short run.
    1. Remain at the current output level
    2. Increase output
    3. Reduce output
    4. Shut down

v. Go back and recalculate your figures because the ones supplied

can't possibly be right.

Firm P MR TR Q TC MC ATC AVC
A 3.90 3.00 2000 7400 2.90 3.24
B 5.90 10000 5.90 4.74 4.24
C 9.00 44000 4000 9.00 11.90 10.74
D 35.90 37.90 5000 37.90 35.90

Price: $2.99
Solution: The downloadable solution consists of 3 pages
Deliverable: Word Document


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