Instructor: Kelly Gollan
1. (0.1 pt) Once a monopolist chooses their profit-maximizing level of output, they
use the _________________________ to find the highest price it can charge
for that quantity.
2. (0.2 pt) For a profit-maximizing monopoly that charges the same price to all
consumers, the price (<, =, >) marginal revenue and
marginal revenue (<, =, >) marginal cost. (Circle the correct answer for each.)
3. (0.1 pt) When a monopolist switches from charging a single price to perfect price
discrimination, it reduces _________________________.
4. A publisher faces the following demand schedule for the next novel from one of its
popular authors: (Make sure to show all your work.)
Price Quantity
Demanded Total Revenue Marginal
Revenue Total Costs Marginal
Costs
$100 0 novels
90 100,000
80 200,000
70 300,000
60 400,000
50 500,000
40 600,000
30 700,000
20 800,000
10 900,000
0 1,000,000
The author is paid $2 million to write the book, and the marginal cost of publishing the
book is a constant $10 per book.
a. (0.7 pt) Compute Total Revenue, Marginal Revenue, Total Costs, and
Marginal Costs in the table above.
b. (0.1 pt) What quantity would a profit-maximizing publisher choose?
c. (0.1 pt) What price would they charge?
d. (0.1 pt) How much profit would the publisher make?
e. (0.6 pt) Graph the Demand curve, Marginal Revenue curve, and the Marginal
Cost curve. Illustrate the profit-maximizing quantity the publisher would
produce and the price they would charge. (Make sure to label the axes.)
