Consider a monopoly market in which the market demand curve is given by P = 240 – 2Q, the marginal revenue curve is MR = 240 – 4Q, the marginal cost curve is MC = 2Q, and there are zero fixed costs. Suppose the government intervenes and turns the market into a competitive market, and all the firms in the market have the same marginal cost curve as the monopolist, MC = 2Q, and zero fixed costs. How much is the resulting gain in total surplus?     300     800     400     600

Scenario 15-2 A monopoly firm maximizes its profit by producing 500 units output (so Q = 500). At that level of output, its marginal revenue is $32, its average revenue is $42, and its average total cost is $36. Refer to Scenario 15-2. At Q = 500, what is the firm's marginal cost? $36 $32 less than $32 greater than $36

The accompanying figure depicts a generalized downward-sloping market demand (D) curve for a product. It also shows the firm's relevant marginal revenue (MR) curve and marginal cost (MC) curve. Use this figure to answer the questions that follow. Price $10 $8 $6 $4 $2 10 20 MR 30 40 D MC → 50 60 Quantity What is the change in total welfare if the firm moves from a monopolist model that charges a single price to a perfect competition model? There would be a loss of $160 in total welfare. O There would be a loss of $80 in total welfare. There would be a gain of $40 in total welfare. O There would be a gain of $120 in total welfare. O There would be no change in total welfare.

Consider the electricity industry, in which there are very large fixed costs but also in which variable costs are directly proportional to total output so that the marginal cost of each unit produced is small and constant.    a) Assuming that one firm has an electricity monopoly, draw a diagram that shows the price the monopolist charges and the quantity the monopolist sells at this price. Be sure to include marginal cost, average total cost, marginal revenue, and demand curves in your diagram.   What happens if the electricity industry is perfectly competitive? More specifically, let us assume that the marginal cost curve from part (a) is equal to the perfectly competitive market supply curve. In this case, show in a diagram what the perfectly competitive equilibrium price and quantity in this industry are. What will happen to the number of firms producing electricity in the long run? What does this say about the desirability of monopoly vs. perfect competition in this industry?…