The Following Table Depicts the Cost and Demand Structure a Natural

question 43

Multiple Choice

The following table depicts the cost and demand structure a natural monopoly faces.Provided that the firm operates as a monopolist,what is the price charged and quantity produced in order to maximize profits? $$\begin{array} { c c c c c c } \text { Quantity } & \text { Price (\$) } & \begin{array} { c } \text { Total } \\\text { Revenue }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Revenue }\end{array} & \begin{array} { c } \text { Total } \\\text { Cost }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Cost }\end{array} \\\hline 0 & 1,000 & 0 & 0 & 0 & 0 \\1 & 900 & 900 & 900 & 800 & 800 \\2 & 800 & 1,600 & 700 & 1,400 & 600 \\3 & 700 & 2,100 & 500 & 1,900 & 500 \\4 & 600 & 2,400 & 300 & 2,400 & 500 \\5 & 500 & 2,500 & 100 & 2,800 & 400 \\6 & 400 & 2,400 & 100 & 3,200 & 400\end{array}$$

• A)price charged of $900 and quantity produced of 1
• B)price charged of $800 and quantity produced of 2
• C)price charged of $700 and quantity produced of 3
• D)price charged of $600 and quantity produced of 4

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Definitions:

Production Function

An equation that describes the relationship between the quantities of productive factors used and the amount of product obtained.

Returns To Scale

Describes how the output of a production process changes as all inputs are scaled up or down by the same proportion.

Input

Resources used in the production process to generate output, including labor, capital, materials, and energy.

Production Function

The representation of the output that a firm can produce with varying combinations of inputs, emphasizing the efficiency and technology used.