Monopoly 3 The owner of an optometry practice has the follow

Monopoly 3. The owner of an optometry practice has the following demand and cost schedules for eye exams: Price per Eye Exams Total Cost Total Revenue Marginal Marginal Cost Eye Exam Per Week Per Week Per Week Revenue (MR) (MC) S10,500 $100 100 S10,800 140 60 200 S11,300 40 310 900 20 550 S12,6000 Fill in the columns for total revenue, marginal revenue, and marginal cost. b. Use the data you filled in for the marginal revenue and marginal cost columns and find the profit-maximizing price (P*) and profit-maximizing number of eye exams (Q*) per week for this practice. c. How much profits will the company make at its optimum?

Solution

Working notes:

(1) Total revenue = P x Q

(2) Marginal Revenue, MR = Change in TR / Change in Q

(3) Marginal cost, MC = Change in TC / Change in Q

(4) Profit = TR - TC

Therefore:

(a)

(b)

Profit is maximized when P* = $60 and Q* = 200

(c)

Optimum profit = $700

P ($)	Q	TC ($)	TR ($)	MC ($)	MR ($)	Profit ($)
100	100	10,500	10,000			-500
80	140	10,800	11,200	7.5	30.0	400
60	200	11,300	12,000	8.3	13.3	700
40	310	11,900	12,400	5.5	3.6	500
20	550	12,600	11,000	2.9	-5.8	-1,600