Tobacco King is a monopolist in the cigarette market in Nicotiana Republic, where the Singaporean dollar is used as the official currency. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. The firm’s demand curve can be expressed as P = 8 - 0.04Q, where Q is the quantity demanded (in millions of packs) and P is the price per pack (in $).] [In a table show Tobacco King, the monopolist’s demand schedule, total revenue, average revenue, and marginal revenue for prices $2, $4, $6, and $8. (Hint: demand schedule refers to prices and quantity demanded at those prices). Based on the table created in answer to part (a), show Tobacco King’s average revenue and marginal revenue curves in a graph. Comment on why the MR curve lies below the AR curve in 100 words or less. Add marginal cost curve to the graph drawn in part (b). Find out the price and quantity combination of cigarettes packets at which, Tobacco King will maximize its profit

Answered: Tobacco King is a monopolist in the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Tobacco King is a monopolist in the cigarette market in Nicotiana Republic, where the Singaporean dollar is used as the official currency. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. The firm’s demand curve can be expressed as P = 8 - 0.04Q, where Q is the quantity demanded (in millions of packs) and P is the price per pack (in $).]

[In a table show Tobacco King, the monopolist’s demand schedule, total revenue, average revenue, and marginal revenue for prices $2, $4, $6, and $8. (Hint: demand schedule refers to prices and quantity demanded at those prices).
Based on the table created in answer to part (a), show Tobacco King’s average revenue and marginal revenue curves in a graph. Comment on why the MR curve lies below the AR curve in 100 words or less.
Add marginal cost curve to the graph drawn in part (b). Find out the price and quantity combination of cigarettes packets at which, Tobacco King will maximize its profit

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