Betty runs a burger joint for tourists, kilometres from the nearest town. She has a monopoly and faces the demand schedule as shown in Table 1 for burgers. Assume Betty’s average cost and marginal cost are constant at $2 a meal. Table 1 – Betty’s Burgers - Demand Schedule Quantity demanded (burgers per week): 160, 140, 120, 100, 80, 60, 40, 20, 0 Price = AR ($): 1, 2, 3, 4, 5, 6, 7, 8, 9 TR ($): MR: MC: TC: Profit: a) Fill in the values in the blank columns for Table 1
Question
Betty runs a burger joint for tourists, kilometres from the nearest town. She has a monopoly and faces the demand schedule as shown in Table 1 for burgers. Assume Betty’s average cost and marginal cost are constant at ): 1, 2, 3, 4, 5, 6, 7, 8, 9 TR ($): MR: MC: TC: Profit: a) Fill in the values in the blank columns for Table 1
Solution
Sure, let's fill in the values for the blank columns in Table 1.
First, we need to calculate Total Revenue (TR), which is the price per burger multiplied by the quantity of burgers sold.
TR = Price * Quantity
Next, we calculate Marginal Revenue (MR), which is the change in total revenue that results from selling one additional unit of a product.
MR = Change in TR / Change in Quantity
Since the Marginal Cost (MC) is constant at $2 a meal, we can fill in this value for all quantities.
Total Cost (TC) is the total expense incurred in reaching a particular level of output; if such total cost is divided by the quantity produced, average total cost is obtained. So,
TC = MC * Quantity
Finally, Profit is calculated as total revenue minus total cost.
Profit = TR - TC
Let's fill in the values:
Table 1 – Betty’s Burgers - Demand Schedule Quantity demanded (burgers per week): 160, 140, 120, 100, 80, 60, 40, 20, 0 Price = AR (): 160, 280, 360, 400, 400, 360, 280, 160, 0 MR: -, 1.2, 0.8, 0.4, 0, -0.4, -0.8, -1.2, -1.6 MC: 2, 2, 2, 2, 2, 2, 2, 2, 2 TC: 320, 280, 240, 200, 160, 120, 80, 40, 0 Profit: -160, 0, 120, 200, 240, 240, 200, 120, 0
Please note that the MR for the first quantity (160) is not calculable as there is no previous quantity to compare it to.
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