ECON 100 Monopolistic Competition Model Question

St. Charles Community College
ECON 100   Survey Economics
Monopolistic Competition Example

Assume a firm that a firm that produces a single product is operating as a monopolistic competitor.  We are given the following demand schedule for the firm’s product:

Price
Quantity
($)
(Units)
16
0
15
300
14
600
13
900
12
1200
11
1500
10
1800
9
2100
8
2400
7
2700
6
3000

Part a:
Using the data shown above, and utilizing the axes shown below,  construct a demand curve for the firm’s product.

 

Part b:
Assume that the firm has a variable and fixed cost schedule that contains the following values:

Quantity
Fixed Costs
Variable Costs
(Units / Mo.
($)
($)
0
4100
0
300
4100
2300
600
4100
3000
900
4100
3900
1200
4100
5000
1500
4100
6300
1800
4100
7800
2100
4100
9500
2400
4100
11400
2700
4100
13500
3000
4100
15800


Complete the following table using the data given above and the formulas given below:

Quantity (Units Per Month)
Fixed Costs ($)
Variable Costs   
($)
Total Costs ($)
Marginal Costs 
($)
Average Total Costs ($)
Price ($)
Total Revenue ($)
Marginal Revenue ($)
Profit ($)










0
4100
0



16



300
4100
2300



15



600
4100
3000



14



900
4100
3900



13



1200
4100
5000



12



1500
4100
6300



11



1800
4100
7800



10



2100
4100
9500



9



2400
4100
11400



8



2700
4100
13500



7



3000
4100
15800



6




The following formulas are given as a guide in your calculations:

  1. Total cost = (fixed cost) + (variable cost)
  2. Marginal cost = (change in total cost)  /  (change in output or quantity)
  3. Average total cost = (Total cost) / (Output or quantity)
  4.  Total revenue = (Price) X (Quantity)
  5. Marginal Revenue = (Change in total Revenue) / (Change in output)
  6. Profit = (Total Revenue) – (Total Cost)

 

Part c:
Using the calculated data from part “b”, and the following set of axes, plot the total revenue curve and the total cost curve.  Then locate the region of the graphs which represent the maximum profit level of the firm.

Part d:
Using the data that you calculated in the part b above, and utilizing the axes that are given below, plot the demand curve, the marginal revenue curve, the marginal cost curve, and the average total cost curve.

 
Part e:
Using the data that you calculated in part b, and using the axes shown below, plot the firm’s profit curve.