Monopoly Application-Based Activity
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