91Ó°ÊÓ

Given data: The firm should practice marginal cost pricing, while the firm should practice average cost pricing.

(a) Calculate the Total Revenue, Marginal Revenue, and Marginal Cost at each output level as follows:

Thus, If a firm has monopoly power, then it will give$2$units of output. At this point marginal revenue equals marginal cost.

The price charged by a monopolist would be$\$90$at this level.

(b) Profit of a firm is calculated by considering total cost and total revenue.

Calculate the profits of the firms as follows:

Profit $=$$($Price $-ATC$$)$$×$Quantity

$=(\$90-88.5)×2$

$=\$3$

Therefore, monopoly profits are $\$3$.

(b) The firm will sell $5$units of quantity because at this level long-run marginal cost equals the price. The price and marginal cost is $\$75$at this level.

Calculate the profits of the firms as follows:

Profit Price Quantity localid="1652341519622" $=$localid="1652341526868" $(\$75-\$81.2)×5$

localid="1652341531687" $=-\$31$

Therefore, monopoly loss islocalid="1652341536112" $\$31.$

(c) The firm will produce 3 units of quantity because at this level long-run average cost equals the price. The price and average cost is$\$85$per unit at this level.

Calculate the profits of the firms as follows:

Profit $=$$($Price localid="1652341556226" $-$localid="1652341559818" $ATC$$)$localid="1652341549376" $×$Quantity

localid="1652341563444" $=(\$85-\$85)×3$

localid="1652341567082" $=\$0$

Therefore, monopoly profits are localid="1652341570419" $\$0$.