The following are the demand and total cost schedules for Company Town Water, a local monopoly: Output in Gallons Price per Gallon Total Cost 50,000 $0.28 $ 6,000 100,000 0.26 15,000 150,000 0.22 22,000 200,000 0.20 32,000 250,000 0.16 46,000 300,000 0.12 64,00 How much output will Company Town Water produce, and what price will it charge? Will it earn a profit? How much? (Hint: First compute the firm’s MR and MC schedules.)
2. The following are the demand and total cost schedules for Company Town Water, a local monopoly:
Output in Gallons
50,000 $0.28 $ 6,000
100,000 0.26 15,000
150,000 0.22 22,000
200,000 0.20 32,000
250,000 0.16 46,000
300,000 0.12 64,00
How much output will Company Town Water produce, and what price will it charge? Will it earn a profit? How much? (Hint: First compute the firm’s MR and MC schedules.)
3. Show from the table in Test Yourself Question 2 that for the water company, marginal revenue (per 50,000-gallon unit) is always less than price.
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