Suppose the firm is a monopoly and the cost of production is

Suppose the firm is a monopoly and the cost of production is 20 + 5q. The marginal revenue is 26 - 5q. Fill in the rest of the table. How many units of output should the firm produce?

Solution

B.) With a view to maximize the profits, a producer will produce up to the quantity at which Marginal cost of production = Marginal revenue (MC = MR). In other words profit maximizing condition of firm is MC = MR.

Accordingly,

20 + 5q = 26 - 5q

10q = 6

   q = 6/10

q = 0.6

Units of output that firm should produce = 0.6 Units [Approximately equal to 1 unit you can say, because units can non be produced in fraction in practical scenario.]

A.) The table produced in the question is filled below:-

Output (q)	FC ($)	VC ($) = 5q	TC ($) = FC + VC	MC ($/unit)	MR ($/units) = 26 - 5q
0	20	-	20	-	-
1	20	5	25	5	21 [26 - 5 *1]
2	20	10	30	5	16 [26 - 5 *2]
3	20	15	35	5	11 [26 - 5 * 3]
4	20	20	40	5	6 [26 - 5 * 4]
5	20	25	45	5	1 [26 - 5 * 5]
6	20	30	50	5	(-)4 [26 - 5 * 6]