04 Jun Question 1. Monopoly: Suppose you are given the following information for Buzz Soda, a monopoly which is the sole producer of high quality,
Question
1. Monopoly: Suppose you are given the following information for Buzz Soda, a monopoly which is the sole producer of high quality, highly caffeinated soda. This monopolist seeks to maximize profits and uses the MR=MC RULE to find its profit maximizing (or loss minimizing) level of output. You must show all of your work where calculations are required and you must include a brief explanation of approximately 20-30 words for written answers to receive full credit:
Q (# cases demanded)
P (price per case) Total Revenue (TR) Marginal Revenue (MR) Total Cost (TC) Marginal Cost (MC)
0 $10.00 $0 — $0.50 —
1 $9.50 $7.50
2 $9.00 $14.00
3 $8.50 $20.25
4 $8.00 $26.75
5 $7.50 $33.50
6 $7.00 $40.50
7 $6.50 $48.00
8 $6.00 $57.00
9 $5.50 $68.00
10 $5.00 $81.00
a. (6 pts) Write down the formulas for, and then fill in the columns for TR, MR, and MC. Explain clearly at least one of each calculation needed for each column.
b. (2pts) What is the profit maximizing level of output (Q*) AND price (P*) for Buzz Soda? Explain your answer.
c. (2pts) Calculate the total economic profit that Buzz Soda would receive by producing at the profit maximizing output level and price. Show all calculations and explain your answer.
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