Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 12, Problem 2RQ
To determine
Marginal Revenue curve.
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A local magic shop has a monopoly on the production of magic wands. Each customer wants only one magic
wand, and the table below shows each customer's willingness to pay. The marginal cost of producing a wand is
$21 no matter how many are produced.
Quantity demanded
Price per wand ($)
LO
01 2 3 4 5
6 78
30 27 24 21 18 15 12 96
If the shop can charge only a single price, it will charge $
wands.
If the firm practices perfect price discrimination, it will sell a total of
earn a profit of $|
and sell
wands and
Suppose that the paper clip industry is perfectly competitive. Also assume that the market price for paper clips is 2 cents per paper clip. The demand curve faced by each firm in the industry is: LO10.3Ā a. A horizontal line at 2 cents per paper clip. b. A vertical line at 2 cents per paper clip. c. The same as the market demand curve for paper clips. d. Always higher than the firmās MC curve.
The following diagram depicts the operating conditions for a profit-maximising monopolist. Calculate the deadweight loss created by this monopoly selling at the profit maximising point.
Price ($)
MC
10
Demand
MR
5
7.5
10
Quantity
(a) $4.25
(b) $6.25
(c) $8.25
(d) None of the above.
20
15
LO
20
15
Chapter 12 Solutions
Microeconomics
Ch. 12.4 - The MR curve lies below the demand curve in this...Ch. 12.4 - Prob. 2QQCh. 12.4 - Prob. 3QQCh. 12.4 - Prob. 4QQCh. 12 - Prob. 1DQCh. 12 - Prob. 2DQCh. 12 - Prob. 3DQCh. 12 - Prob. 4DQCh. 12 - Prob. 5DQCh. 12 - Prob. 6DQ
Ch. 12 - Prob. 7DQCh. 12 - Prob. 8DQCh. 12 - Prob. 9DQCh. 12 - 10. LAST WORD Using Big Data to set personalized...Ch. 12 - Prob. 1RQCh. 12 - Prob. 2RQCh. 12 - Prob. 3RQCh. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5P
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- The figure on the right shows the demand schedule for a product produced by a single-price monopolist. Price ($) 9 8 0000 7 6 5 4 3 C. 5th unit Quantity demanded What is the lowest level of output at which marginal revenue becomes negative? OA. 6th unit OB. 9th unit D. 7th unit OE. 8th unit 5 6 7 8 9 10 11 Price ($) 141 222 =26=LO 13- 12- 11- 10- 9- 8- 4- 2- 1- 45 6 7 8 9 10 11 12 13 14 15 16 Quantity Earrow_forwardConsider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. COSTS (Dollars per pound) 80 72 64 56 co o 32 + 16 8 0 0 4 MC 0 ATC AVC 8 12 16 20 24 28 QUANTITY (Thousands of pounds) 32 38, 72 36 40 āøarrow_forwardThe diagram shows cost and revenue curves for a natural monopoly producing electricity. Price is dollars per kilowatt hour and quantity is kilowatt hours per day. Suppose this firm is being regulated using a pricing policy of average-cost pricing. In this case, economic losses are equal to O A. $30,000. O B. $0. O C. $11,000. O D. $7,000. O E. $126,000. Co Price($/kwh) 0.15) 0.14 0.13 0.11 8:89 EMR 3.6 Quantity (million) 3 5.4 ATC MC D Q Q 4arrow_forward
- Which of the following markets is susceptible to being a natural monopoly? (Select all that apply?) O a. Electricity transmission b. Vaccine production C. Music production d. Sewage management O e. Airport Of. Computer production A Moving to another question will save this response. O O 0 0arrow_forwardIgnore AFC and AVC 2. Suppose a pure monopolist faces the following demand schedule and the same cost data as the competitive producer discussed in problem 4 at the end of Chapter 10. Calculate the missing TR and MR amounts, and determine the profit-maximizing price and profit-maximizing output for this monopolist. What is the monopolist's profit? Verify your answer graphically and by comparing total revenue and total cost. LO11.4 Average Total Average Variable Average Marginal Product Fixed Cost Cost Total Cost Cost 0 $45 1 $60.00 $45.00 $105.00 40 2 30.00 42.50 72.50 35 3 20.00 40.00 60.00 30 4 15.00 37.50 52.50 35 5 12.00 37.00 49.00 40 6 10.00 37.50 47.50 45 7 8.57 38.57 47.14 55 8 7.50 40.63 48.13 65 9 6.67 43.33 50.00 75 10 6.00 46.50 52.50 Price Quantity Demanded Total Revenue Marginal Revenue $115 83 63 55 48 42 29 2 % 522332 100 0 1 2 3 4 5 6 7 37 8 9 10 $arrow_forwardFor a single-price monopoly, marginal revenue is when demand is elastic and is when demand is inelastic. Select one: O a. positive; negative O b. negative; positive O c. negative; negative O d. positive; positivearrow_forward
- 10. Is the demand for a life-saving drug like Daraprim (Front Page Economics "Drugmaker Hikes Price of AIDS Drug 5,000 Percent!") likely to be elastic or inelastic? How does that affect the pricing decision of a monopolist? LO10-1 IT quarrow_forwardWhich of the following statements about the firm depicted in the diagram is true? O A. The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. O B. The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits. OC. The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. O D. The fact that this firm is a natural monopoly is shown by the long-run average total cost curve still falling when it crosses the demand curve. Price and cost per unit 905 70 59 35 20 0 MA 580 835 1,740 1,900 2,204 MC Demand ATC Quantityarrow_forwardExhibit 9-4: A Monopoly Total Quantity Total Fixed Variable Price Demanded Cost Cost $100 $20 $0 90 1 $20 20 80 $20 48 70 3 $20 78 60 4 $20 110 50 $20 150 Refer to Exhibit 9-4. At an output level of 4 units, the monopolist earns a total profits of about O $118.00 O $112.00 O $110.00 O$120.00 2.arrow_forward
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