The Table Below Is the Demand Faced by the Tienshan

question 166

Essay

The table below is the demand faced by the Tienshan Company, a monopolist that enjoys zero variable cost in its production of fine mineral water. $\begin{array} { c c } \hline \text { Price } & \text { Quantity Demanded } \\\hline \$ 2.50 & 60 \\2.25 & 70 \\2.00 & 80 \\1.75 & 90 \\1.50 & 100 \\1.25 & 110 \\1.00 & 120 \\0.75 & 130 \\0.50 & 140 \\0.25 & 150 \\0 & 160 \\\hline\end{array}$ a) What is the price Tienshan will charge and what quantity of output will it produce?
Suppose that Endless Journey Inc., which also has zero variable costs, enters this industry and assumes that Tienshan will continue to produce its current output.
b) What output will Endless Journey choose to produce and what will be the new market price, given both firms' output?

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Definitions:

Special Order

A one-time customer order often involving unique specifications, which might not fit into the company's standard offerings.

Variable Cost

Costs that vary directly with the level of production or volume of output, such as raw materials and direct labor.

Fixed Cost

Fixed cost refers to a cost that does not change with the level of output or sales in the short term, such as rent, salaries, or loan payments.

Sunk Cost

Costs that have already been incurred and cannot be recovered or altered.