Suppose a firm is a monopoly. Its marginal cost curve is flat, and its average cost curve is downward sloping (because it has a fixed cost). 1.) Using the point drawing tool, indicate the monopoly's profit-maximizing price and quantity in the figure if it cannot price discriminate. Label this point 'e..' 2.) Using the rectangle drawing tool, indicate the monopoly's losses at the no price discrimination profit-maximizing price and quantity. Label this rectangle 'Losses,." 3.) Using the point drawing tool, indicate the monopoly's profit-maximizing quantity in the figure if it perfectly price discriminates and the price charged for the last unit produced. Label this point 'e2. 4.) Using the triangle drawing tool, indicate the monopoly's producer surplus with perfect price discrimination. Label this triangle 'PS2. Carefully follow the instructions above, and only draw the required objects. price, $ per ticket AC MR Q. Tickets per concert DMC G

Suppose a firm is a monopoly. Its marginal cost curve is flat, and its average cost curve is downward sloping (because it has a fixed cost). 1.) Using the point drawing tool, indicate the monopoly's profit-maximizing price and quantity in the figure if it cannot price discriminate. Label this point 'e..' 2.) Using the rectangle drawing tool, indicate the monopoly's losses at the no price discrimination profit-maximizing price and quantity. Label this rectangle 'Losses,." 3.) Using the point drawing tool, indicate the monopoly's profit-maximizing quantity in the figure if it perfectly price discriminates and the price charged for the last unit produced. Label this point 'e2. 4.) Using the triangle drawing tool, indicate the monopoly's producer surplus with perfect price discrimination. Label this triangle 'PS2. Carefully follow the instructions above, and only draw the required objects. price, $ per ticket AC MR Q. Tickets per concert DMC G

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.3P

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Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?
Why does a monopoly arise? O because of diseconomies of scale because entry to an industry is blocked because of elastic demand because firms want to maximize profits
How can a monopolist identify the profit-maximizing level of output if it knows its total revenue and total cost curves? A. The profit-maximizing level of output can be determined by comparing marginal revenue and total cost. B. Cannot be determined from this information C. The profit-maximizing level of output will be where there is the greatest difference between total revenue and total cost. O D. The profit-maximizing level of output will be where there is the smallest difference between total revenue and total cost.
Over a recent family dinner, your Aunt Trudy expresses her disdain for price discriminating monopoly businesses, to which you, having taken some economics reply, "A perfect price discriminating monopoly may convert all of the consumer surplus to monopoly profit, but at least it produces O A. more output than a competitive industry would produce. OB. the same output that a competitive industry would produce. C. at the minimum of its average total cost (ATC) curve. D. where its marginal cost (MC) curve is still declining.
A monopoly has a constant marginal cost of production of $4 per unit and no fixed costs. In the figure to the right, let D be demand and MR be marginal revenue. 1.) Using the line drawing tool, graph the monopoly's marginal cost curve. Label this curve 'MC.' 2.) Using the line drawing tool, graph the monopoly's average variable cost curve. Label this curve 'AVC.' 3.) Using the line drawing tool, graph the monopoly's average cost curve. Label this curve 'AC.' 4.) Using the point drawing tool, indicate the monopoly's profit-maximizing price and quantity. Label this point 'e.' 5.) Using the rectangle drawing tool, shade in the monopoly's profit. Label this 'profit.' 6.) Using the triangle drawing tool, shade deadweight loss created by the monopoly. Label this 'DWL.' Carefully follow the instructions above, and only draw the required objects. p, $ per unit 30- 28- 26- 24- 22+ 20- 18- 16- 14+ 12- 10- 8- 6- 4- 2- 0+ 0 2 4 -co 6 MR D 8 10 12 14 16 18 20 22 24 26 28 30 Q, Quantity Check answer
Exercise 5. You are the manager for a monopoly with costs, demand, and marginal revenueas in the graph at the top on Figure 1.a. Does the fact that you operate in a monopoly always guarantee that you can achievehigher profits by increasing the price? Explain.b. Draw the area representing the profits on the top graph on Figure 1.c. Suppose one of your suppliers just announced an increase in prices for a specific partthat your product requires. What should the impact be to each of the curves on thetop graph of Figure 1? Explain carefully.d. Suppose economic conditions change in such a way that the demand curve for yourcompany shifts left.i. Draw a demand curve on the bottom graph on Figure 1 that leads to zero economicprofits.ii. Draw a demand curve on the bottom graph on Figure 1 such that any furtherleftward demand shift will cause you to shutdown.
One way a monopoly can convert additional consumer surplus into economic profit is to O price discriminate raise prices O lower prices
ystem (Academic) Mes of Microeconomics || Fall20 Suppose a monopolist's costs and revenues are as follows. ATC = S50, MC = $35; MR = $40; P $55. The firm should of Select one: O a. decrease output and increase price. tion O b. increase output and decrease price. O c not change output or price. O d. shut down. Next page s page 00 HUAWEI Nova 3 Al CAMERA
Consider the relationship between monopoly pricingand price elasticity of demand.a. Explain \\•hy a monopolist will never produce aquantity a t which the demand curve is inelastic.(Hint: If demand is inelastic and the firm raisesits price, what happens to total revenue and totalcosts?)b. Draw a diagram for a monopolist,. preciselylabeling the portion of the demand curve thatis inelastic. (Hint: The answer is related to themarginal-revenue curve.)c. On your diagram, show the quantity and pricethat maximize total revenue.
The inefficiency of the monopoly lies in the higher output that it sells and the lower price that it charges for its commodity. O True O False
Plz do the both questions. Which of the following statements is true about a monopoly?O.A. there are no barriers to entryO.B. they earn positive economic profits in the short run onlyO.C. they produce a good that has close substitutesO.D. none of the above
The figure to the right shows the average cost of production (AC) for a cable company that is a monopoly as well as the corresponding demand (D) for cable subscriptions in the city to which the company provides service. Is this company a natural monopoly? This firm O A. is a natural monopoly because average cost is decreasing when it crosses demand. B. is not a natural monopoly because its demand is downward sloping. C. is a natural monopoly because total cost does not always increase with output. O D. is a natural monopoly because it has excess capacity. O E. is not a natural monopoly because it must advertise. Price (dollars per subscription) 80- 76- 72- 68- 64- 60- 56- 52- 48- 44- 40- 36- 32- 28- 24- 20- 16- 12- 8- 4- 0- D AC 5 6 8 9 Quantity (cable subscriptions in 1000s) Ⓡ 10