A monopoly firm has a total fixed cost of Rs 100 and has the following demand schedule:


Quantity



1



2



3



4



5



6



7



8



9



10



Price



100



90



80



70



60



50



40



30



20



10



Find the short run equilibrium quantity, price and total profit. What would be the equilibrium in the long run? In case the total cost was Rs 1000, describe the equilibrium in the short run and in the long run.



Quantity



Price



Total Revenue (PXQ)



1



100



100



2



90



180



3



80



240



4



70



280



5



60



300



6



50



300



7



40



280



8



30



240



9



20



180



10



10



100



The total cost of monopolist firm is zero, so the profit will be the maximum where TR is maximum.


At the 6th unit of output the firm will maximise its profit and the short run equilibrium price will be Rs 50.


Profit = TR – TC


= 300 – 0


= Rs 300


If the total cost is Rs 1000, then


Profit = TR – TC


= 300 – 1000


= - Rs 700


In this case the firm is earning loss and not profit. So, it will stop its production in the long run.


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