Question

The Exclusive Gift Company has a monopoly over the sale of gold hula hoops. This company is currently pricing and producing where marginal revenue is equal to marginal cost. It is selling 50 gold hula hoops at a price of $5,000 each. Total costs for the company are $300,000 of which fixed costs are $100,000. You are hired as an economic consultant to this company. You should advise this monopolist to

Answer 1

Answer:

Produce throughout the shorter term but depart the industries run if the circumstances don't start changing because the losses are incurred.

Explanation:

The given values are:

Gold sells,

Q = 50

Price,

= $5000

Total cost,

= $300,000

Fixed cost,

= $100,000

So,

⇒ $TR=5000\times 50$

⇒       $=250000$ ($)

Now,

⇒ $TVC=300000-100000$

⇒          $=2000 00$

So that,

⇒ $AVC=\frac{VC}{Q}$

On substituting the values, we get

⇒          $=\frac{200000}{50}$

⇒          $=4000$

So the above is the correct answer.