Reference no: EM132456729

Question

Q	P	TR	MR	TC	MC
0	11	0	-----	4	-----	-----
1	10	10	10	10	60	0
2	9	18	8	14	4	4
3	8	24	6	20	6	4
4	7	28	4	27	7	1
5	6	30	2	37	10	-7

In the example above showing Andy's profit maximizing output decision, you should have found that Joe sets his price above marginal cost (P > MC). We call this the monopoly mark-up.

a. Can you think of a special case where Andy, despite being a monopoly, would find it profit maximizing to set P = MC?

b. Assume that Andy cannot price discriminate and briefly explain your answer. (hint: consider what makes Andy's case different from a perfectly competitive firm).

c. In general, what will determine the magnitude of the monopoly mark-up (hint: is it better to have a monopoly over bubble gum or water)?

Note***Please check my table calculation for accuracy.