Show Deadweight Loss
Show Economic Profit/Loss
($) Price, Average/Marginal Cost
225
200
175
MC
150
125
ATC
100
AVC
75
50
25
MR D 80 100 120 140 160 180 Quantity (units per month)
0
20
40 60
SETTINGS
Reset
PROFIT CALCULATIONS
Market Price (Pmis)
$125.00
Cost Structure Low Cost a b c
High Cost ghij k1 m n o
Marginal Revenue (MR)
$50.00
Marginal Cost (MC)
$55.00
Quantity
Revenue
$7,500.00
40
120
Costs
$5,066.67
Quantity
60
Profit
$2,433.33
Instructions: Make sure the interactive is set to "Natural Monopoly" on the upper right side of the Graph section. When "Natural Monopoly" is selected, it will have a dark blue background.
With the Cost Structure (in the settings section) set to "a"
a. What is the profit maximizing quantity? 60 units
b. What is the maximum profit that can be earned? $2100
With the Cost Structure in the settings section) set to "e"
c. What is the profit maximizing quantity? 60 units
d. What is the maximum profit that can be earned? $2433.33
Let the Cost Structure remain at "e"
e. If the firm decides to produce 80 units (where the average total cost equals demand -- P = ATC), the Revenue is $10000, the Costs are $10000, and profits are $0.
