text: Question
  
  # Karl's Cab Company has a monopoly in Junction City. The demand for taxi services in Junction...
  
  1. Karl's Cab Company has a monopoly in Junction City. The demand for taxi services in Junction City is given by Q = 5 – (1/6)P. KCC's costs are given by
  
  TC = 14 + 3Q +3Q2. Its profit maximizing output is
  
  1. .5
  2. 1.0
  3. 1.5
  4. 2.0
  1. Karl's Cab Company has a monopoly in Junction City. The demand for taxi services in Junction City is given by Q = 5 – (1/6)P. KCC's costs are given by
  
  TC = 14 + 3Q +3Q2. Its maximum profits are
  
  1. \$1
  2. \$5
  3. \$6.25
  4. \$21
  5. \$14
  
  Given, TC = 14 + 3Q + 3Q2
  
  Marginal Cost (MC) = d(TC)/dQ = 3 + 6Q
  
  Also, Q= 5 - (1/6)P
  
  P = 30 - 6Q
  
  Total Revenue (TR) = P*Q = (30 - 6Q) * Q = 30Q - 6Q2
  
  Marginal revenue (MR) = d(TR) / dQ = 30 - 12Q
  
  Profit maximizing condition for a monopoly is,
  
  MC = MR
  
  3 + 6Q = 30 - 12Q
  
  18Q = 27
  
  Q = 27/18 = 1.5 (c)
  
  Therefore, profit maximizing output is 1.5
  
  For this level of output,
  
  Total Cost (TC) = 14 + 4.5 + 6.75 = \$25.25
  
  Total Revenue (TR) = 45 - 13.5 = \$31.5
  
  Therefore, maximum profit = TR - TC = \$31.5 - \$25.25 = \$6.25 (c)
  
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