Monopoly Application-Based Activity

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If I offer 7 training sessions at a price of $65, what do I earn in total profit from all 7 sessions?

$210

What is the total revenue if I sell 4 training sessions?

$320 ($80x4)

What is my profit from the third training session?

$40 ($75-$35)

On the second training session, you will make a profit of?

$50 ($85-$35)

On the first training session , you will make a profit of.?

$60 ($95-$35)

To maximize my profits, I will offer 7 training sessions at what price?

$65.00

What is my marginal revenue if I increase the number of training sessions from one to two?

$85 (180-95/2-1) = 85/1

Offer training sessions until my marginal revenue is equal to my marginal cost. So I should offer how many sessions?

7 ($35-$35=0)

How are they related?

Economists have a 'law" for this relationship; the law of demand

What does the law of demand say?

Holding all else constant, price and quantity demanded are inversely (negative) related.

What do you mean by a monopoly?

In a monopoly market, there is only one seller of a good or service that has no close substitute

If I charge $50, I sell 10 training sessions a day. This gets me the highest total revenue! To maximize my profits, I should charge a price of $50, right?

That's not the whole picture. The total revenue is just one part of the profit formula. We have to consider your cost as well.

The lower the price I charge...

The more training sessions you will sell

Should I offer a third training?

Yes, because your marginal revenue exceeds your marginal cost

Is this the information you need?

Yes, we call this your marginal cost

My highest marginal revenue is $95. Does this mean I should charge a price of $95 and sell one training session to maximize my profits?

You do earn a profit on the first training session, but you will not have maximized your profits at this price and quantity combination.

If I charge $100 a training session....

You will not sell any sessions


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