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Homework answers / question archive / A monopolist does not always earn an economic profit
A monopolist does not always earn an economic profit. Although the monopolist faces no competition, on account of high entry barriers, the monopolist may earn profits or losses depending on how high or low demand is. Let's see how the monopolist discussed in the problem below does. 1st attempt Part 1 (1 pt) Sheldon is the only landscaper in town. To keep things simple, he only mows lawns. Assume he has five possible customers with different willingness to pay for a month of lawn service as depicted in the table below. Customer Willingness to pay (WTP) for a month of lawn service $120 1 2 $100 3 $80 4 $60 5 $40 Suppose Sheldon has variable costs of $35 per customer and fixed costs of $150. Sheldon must charge each customer the same price, so he needs to decide whether to charge $120, $100, $80, etc. If Sheldon maximizes his profit, he will earn $ the negative sign). (if there are losses, include
Part 2 (1 pt) Not satisfied with his current situation, Sheldon increases his service area so that he now has eight possible customers with different willingness to pay for a month of lawn service as depicted in the table below. Customer Willingness to pay for a month of lawn service 1 $180 2 $160 3 $140 4 $120 5 $100 6 $80 7 $60 8 $40 Sheldon has the same costs as before: $35 in variable costs and $150 in fixed costs. Sheldon must charge each customer the same price, so he needs to decide whether to charge $180, $160, $140, etc. If Sheldon maximizes his profit, he will earn $ the negative sign). (if there are losses, include
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