A firm operating in a monopoly market knows that the demand curve for its curve is given by P = 1,000 -2*Q, and there are no fixed costs of producing of producing the good and that the marginal cost of producing the good is given by the equation MC = 100.
Draw the demand curve.
Draw the marginal revenue (MR) curve.
Indicate the portion of the demand curve where the quantity effect is stronger than the price effect. What happens with the Total Revenue (TR) and the Marginal Revenue (MR) in this portion of the demand curve?
Calculate the profit-maximizing price and the profit-maximizing quantity for the good sold at a single price. Find the maximum level of profits achieved by the firm.
Suppose that the monopolist is now willing to sell the first 50 units at a single price P1, between the 50 and the 150 units at a price P2, and between 150 and 225 units at a price P3. This is called price discrimination. Determine the monopolist’s profits when it pursues a three-price policy.