QUESTION 25

Imagine that Starbucks becomes the sole seller of retail coffee in the U.S. As a monopoly, Starbucks faces the full market demand schedule, as shown in the first two columns of the table below.

(For each section of this question, you may draw out the tables or graphs by hand on scratch paper, take a photo, with your cellphone for example; or you may draw and scan the image. You can upload your image file using a PDF or JPEG and the "upload file" button provided in this question).

Q (Billion coffees per year)	P ($ per coffee)	TR ($Billion/year)	MR ($Billion/year)
0	12
1	10
2	8
3	6
4	4
5	2

(a) Fill in the missing spaces of the table.

(b) Draw a graph of the market demand curve.

(c) Graph Starbuck's marginal revenue (i.e. MR) curve on the same graph as their demand curve in part (b), with Q on the x-axis and MR on the y-axis.

(d) Starbucks has the following TC schedule shown in the first two columns of the table below. Fill in the missing spaces of the table, and then graph their marginal cost (i.e. MC) curve on the same graph as you used to show their demand curve and MR curve.

Q (Billion coffees per year)	Total Cost ($Billion/year)	MC ($Billion/year)
0	2
1	4
2	10
3	18
4	28
5	40

(e) What is Starbuck's profit maximizing level of output? What is the price that Starbucks will charge consumers at this level of output?