a)
Graph showing
a)
Answer to Problem 1FRQ
QM is the profit-maximizing output level.
Explanation of Solution
Point A is the profit-maximizing point where MR=MC and QM is the profit-maximizing output level.
Introduction:
Monopolist maximizes their profit where marginal cost equates to marginal revenue. And to be in the market, the firm must cover its
b)
Graph showing monopoly’s price.
b)
Answer to Problem 1FRQ
Monopoly’s price is PM.
Explanation of Solution
Point on the demand curve determines the price PM.
Introduction:
A monopolist charges a different price from different consumers for the same quantity. Profit-maximizing output and price are determined at the point where the marginal revenue curve intersects the marginal cost curve.
c)
Graph showing the profit of the monopolist.
c)
Answer to Problem 1FRQ
Red-shaded region.
Explanation of Solution
The red-shaded region is the profit of the monopolist where marginal cost and marginal revenue equate.
Introduction:
Profit is the difference between total revenue and total cost.
d)
Regulated price that would maximize
d)
Answer to Problem 1FRQ
PR is the minimum regulation price.
Explanation of Solution
PR is the minimum regulation price that maximizes the consumer surplus without creating losses for the firm because the firm cover at least it's average total cost.
Introduction:
Monopolist maximizes their profit where marginal cost equates to marginal revenue. And to be in the market, a firm must cover its average total cost otherwise firm will leave the market.
Chapter 62 Solutions
Krugman's Economics For The Ap® Course
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