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Q.3.4:

Ted has acquired a monopoly in the production of cricket balls and faces the demand and cost situation shown in the table below.

• Fill in the missing values in the table
• If Ted wants to maximise profits what price should he charge and how many cricket balls should he sell? How much profit will he make?
• to maximise profits, ted should produce where marginal revenue equals marginal cost.
• Suppose the government imposes a tax of \$50 000 per week on cricket ball production. Now what price should ted charge, how many cricket balls should he sell and what would his profits be?
• Suppose that the government raises the tax in part c to \$70 000. Now what price should Ted charge, how many cricket balls should he sell, and what will his profit (or loss) be? Will his decision on what price to charge and how much to produce be different in the short run than in the long run? Briefly explain.
 Price Quantity (per week) Total revenue Marginal Revenue Total Cost Marignal Cost \$20 15000 300,000 300,000 \$330000 19 20000 380,000 80,000 365000 18 25000 450,000 70,000 405000 17 30000 510,000 60,000 450000 16 35000 560,000 50,000 500000 15 40000 600,000 40,000 555000

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This question was answered on: Feb 21, 2020

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