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Mary is thinking of quitting her current job to operate an upstairs bakery store. Her current salary is $240,000 per year. Consider the following information for the coming year if she goes ahead to operate the upstairs bakery store full time. To operate this business, Mary will use the unit she owns in a commercial building for her bakery store. Mary will earn a rental income of $180,000 in the coming year if she does not use the unit as her store. She has to spend $600,000 to purchase physical capital such as furniture and equipment, and their market values will decrease by 25% in the first year of operation. She has to pay $120,000 a year to hire an assistant. And she will pay herself an annual salary of $180,000. She has to spend $60,000 on materials, utilities, and all other relevant costs in a year. To finance the initial investment and operating costs, Mary has to use her saving of $200,000, from which she could earn an interest of 3 percent in the coming year. a) One big international bakery group has bought all the existing individual bakery stores and formed a monopoly. The market demand remains the same and the marginal revenue of the monopoly is MR = 25-5Q. This monopoly re-allocates all the production resources, and finally its total cost becomes TC=3Q²-8Q+9 and its marginal cost is MC= 6Q-8, where Q is in millions of units. What will be the selling price and profit for this monopoly? Illustrate the profit-maximizing price and quantity in a diagram.

Mary is thinking of quitting her current job to operate an upstairs bakery store. Her current salary is $240,000 per year. Consider the following information for the coming year if she goes ahead to operate the upstairs bakery store full time. To operate this business, Mary will use the unit she owns in a commercial building for her bakery store. Mary will earn a rental income of $180,000 in the coming year if she does not use the unit as her store. She has to spend $600,000 to purchase physical capital such as furniture and equipment, and their market values will decrease by 25% in the first year of operation. She has to pay $120,000 a year to hire an assistant. And she will pay herself an annual salary of $180,000. She has to spend $60,000 on materials, utilities, and all other relevant costs in a year. To finance the initial investment and operating costs, Mary has to use her saving of $200,000, from which she could earn an interest of 3 percent in the coming year. a) One big international bakery group has bought all the existing individual bakery stores and formed a monopoly. The market demand remains the same and the marginal revenue of the monopoly is MR = 25-5Q. This monopoly re-allocates all the production resources, and finally its total cost becomes TC=3Q²-8Q+9 and its marginal cost is MC= 6Q-8, where Q is in millions of units. What will be the selling price and profit for this monopoly? Illustrate the profit-maximizing price and quantity in a diagram.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 3E
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45 Mary is thinking of quitting her current job to operate an upstairs bakery store. Her current salary is $240,000 per year. Consider the following information for the coming year if she goes ahead to operate the upstairs bakery store full time. To operate this business, Mary will use the unit she owns in a commercial building for her bakery store. Mary will earn a rental income of $180,000 in the coming year if she does not use the unit as her store. She has to spend $600,000 to purchase physical capital such as furniture and equipment, and their market values will decrease by 25% in the first year of operation. She has to pay $120,000 a year to hire an assistant. And she will pay herself an annual salary of $180,000. She has to spend $60,000 on materials, utilities, and all other relevant costs in a year. To finance the initial investment and operating costs, Mary has to use her saving of $200,000, from which she could earn an interest of 3 percent in the coming year. a) One big international bakery group has bought all the existing individual bakery stores and formed a monopoly. The market demand remains the same and the marginal revenue of the monopoly is MR = 25-5Q. This monopoly re-allocates all the production resources, and finally its total cost becomes TC=3Q2-8Q+9 and its marginal cost is MC= 6Q-8, where Q is in millions of units. What will be the selling price and profit for this monopoly? Illustrate the profit-maximizing price and quantity in adiagram.
Transcribed Image Text:45 Mary is thinking of quitting her current job to operate an upstairs bakery store. Her current salary is $240,000 per year. Consider the following information for the coming year if she goes ahead to operate the upstairs bakery store full time. To operate this business, Mary will use the unit she owns in a commercial building for her bakery store. Mary will earn a rental income of $180,000 in the coming year if she does not use the unit as her store. She has to spend $600,000 to purchase physical capital such as furniture and equipment, and their market values will decrease by 25% in the first year of operation. She has to pay $120,000 a year to hire an assistant. And she will pay herself an annual salary of $180,000. She has to spend $60,000 on materials, utilities, and all other relevant costs in a year. To finance the initial investment and operating costs, Mary has to use her saving of $200,000, from which she could earn an interest of 3 percent in the coming year. a) One big international bakery group has bought all the existing individual bakery stores and formed a monopoly. The market demand remains the same and the marginal revenue of the monopoly is MR = 25-5Q. This monopoly re-allocates all the production resources, and finally its total cost becomes TC=3Q2-8Q+9 and its marginal cost is MC= 6Q-8, where Q is in millions of units. What will be the selling price and profit for this monopoly? Illustrate the profit-maximizing price and quantity in adiagram.
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