Below are two different cases. In each case, the monopolist wants to maximize its profits or minimize its losses. Analyze each case and give a recommendation as to what the monopolist should do based on the possible recommendations provided below. Explain how you reached this recommendation and the reasons for it. You may have to fill in some figures before you decide what to recommend.
Possible Recommendations:
Increase production and reduce the price.
Decrease production and raise the price.
Shut down.
The monopoly is currently at the correct position.
(3 points)
Price = 6 Marginal Revenue = 3
Quantity of Output = 1500 Total Revenue = _____
Total Cost = _____ Fixed Costs = 1500
Average Cost = 3 Marginal Cost = 2
(3 points)
Price = 3 Marginal Revenue = 2
Quantity of Output = 1500 Total Revenue = _____
Total Cost = 4500 Fixed Costs = _____
Average Cost = _____ Marginal Cost = 3
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