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Essay text:
Since Profit = Marginal Revenue, (P=MR), the output was reduced to where Profit=Marginal Revenue=Marginal Cost (P=MR=MC). The given price at this juncture is $55 per hundred weight or 6.75 million hundred weight shipments. The division is able to cover variable cost but not fixed costs.
The 2nd scenario involves East-West Transportation as the only transporter of coal from the Eastern Region with the exodus of the only competitor. Since the company is now a monopoly in this area, determining the price to set to maximize revenue by increasing price and reduce output. Profit, in this case, is found where Marginal Revenue exceeds Marginal Cost (MR>MC)...
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