1. Poland Springs has the rights to the last source of fresh spring water. Therefore, they have a monopoly in the market for fresh bottled water. Use the information in the below table to answer the following questions.

- What are the fixed costs in this situation?

- Use the numbers in the table to obtain the other values you need for profit maximization.

- What are the variable costs at each quantity?

- Sketch Poland Springs demand, marginal revenue, and marginal cost curves on the same graph and label the point of profit maximization.

- If the firm wants as many people as possible to have water, what price should it charge?

- To maximize total revenue, what price should be charged and how much quantity will be sold?

- Calculate Poland Springs? profit-maximizing level of output, price, and profit

- The building where the bottling occurs is owned by another company. If that company raises the rent by $15.50 per hour, what are the new profit-maximizing levels of output, price, and profit? *Hint: what type of cost is rent?

2. For the following two situations fully explain why the monopolist would increase or decrease output.

- Marginal Revenue exceeds Marginal Cost

- Marginal Cost exceeds Marginal Revenue

Price per bottle Quantity of bottles (per hour) 0 10 9 8 7 6 5 4 3 IN 2 1 0 1 IN 2 3 4 5 6 7 loo 8 9 10 Total Cost (dollars per hour) 1.0 1.5 2.5 5.5 10.5 17.5 26 35 45 56.5 70