Econ Micro (book Only)
6th Edition
ISBN: 9781337408066
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 9, Problem 4P
To determine
a.
Output and price at which monopolist operate.
Concept Introduction:
A market with the single seller and large number of buyers is referred as
To determine
b.
Firm’s total cost and total revenue.
Concept Introduction:
A market with the single seller and large number of buyers is referred as monopoly market. In this market structure, the competition among sellers does not exist, because single seller prevails in the market.
To determine
c.
Firm’s economic
Concept Introduction:
A market with the single seller and large number of buyers is referred as monopoly market. In this market structure, the competition among sellers does not exist, because single seller prevails in the market.
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Students have asked these similar questions
A monopolist is faced with the following cost and revenue curves:(picture)
a.What is the maximum-profit price and output,total revenue, total cost and profit?
b.If the monopolist were ordered to produce 300 units, what would be the market price and how much profit would now be made
c.If the monopolist were faced with the same demand, but average costs were constant at £60 per unit, what output would maximise profit?
What would be the price now?.................................................................................................
(j) How much profit would now be made? ...................................................................................
(k) Assume now that the monopolist decides not to maximise profits, but instead sets a price of
£40. How much will now be sold?
..................................................................................................................................................
(l) What is the marginal revenue at this…
(Figure: Demand, Revenue, and Cost Curves for Thneeds) Use Figure: Demand, Revenue, and Cost Curves for Thneeds.
Thneeds and Things is a monopolist in the thneed ("things we need") market. If the government wants to regulate Thneeds
so that an efficient outcome is reached, it would impose a price ceiling of:
Price of
thneeds
$100
90
$40.
$46.
$50.
$65.
80
70
60
50
40
30
20
10
0 20
MR
D
MC
ATC
60 100 140 180 220
Quantity of thneeds
2. Entry or exit in the long run
Fantastique Bikes is a company that manufactures bikes in a monopolistically competitive market. The following graph shows Fantastique's demand
curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC).
Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive
company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss.
500
450
Monopolistically Competitive Outcome
400
350
300
Profit or Loss
A ATC
250
200
150
MC
100
50
MR
Demand
50
100
150
200
250
300
350
400
450
500
QUANTITY (Bikes)
Given the profit-maximizing choice of output and price, the shop is earning
profit, which means there are
shops in the industry than in long-run equilibrium.
PRICE (Dollars per bike)
Chapter 9 Solutions
Econ Micro (book Only)
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- (Table) Suppose a monopolist faces the demand relationship shown in the table. Marginal revenue for the second unit of output is: Quantity Demanded Price $10 $8 $7 $5 $3 $2 1 2. 3. 4 O A. $2. OB. $6 OC. $7. O D.$21.arrow_forward2. The demand schedule for the product produced by a monopolist is given in the table below. Complete the table by computing total revenue and marginal revenue. Quantity Total Marginal demanded Price (a) What do the data in the table indicate about revenue revenue the relationship between total revenue and 1 $325 $. marginal revenue? Explain. 300 275 4 250 225 6. 200 7 175 8 150 6. 125 (b) What do the data in the table indicate about 10 100 the elasticity of demand? 11 75 12 50 13 25 14 | | | | | | | |I | | %24 3.arrow_forward(Table) Suppose a monopolist faces the demand relationship shown in the table. If the marginal cost is $6, then the profit-maximizing output is (hint: Find marginal revenue) Quantity Demanded Price $10 $8 $7 $5 $3 $2 3\ 4. 5. 6. OA 4 units. O B. 3 units. OC.1 unit. OD.2 units.arrow_forward
- ICE (Dollars per scooter) 3. How short-run profit or losses induce entry or exit Citrus Scooters is a company that manufactures electric scooters in a monopolistically competitive market. The following graph shows the demand curve, marginal revenue curve (MR), marginal cost curve (MC), and average total cost curve (ATC) for Citrus. Place the black point (plus symbol) on the graph to indicate the short-run profit-maximizing price and quantity for this monopolistically competitive company. Then, use the green rectangle (triangle symbols) to shade the area representing the company's profit or loss 500 450 400 360 200 250 200 150 400 50 MC- ATC MR Demand 150 200 250 300 360 400 450 500 QUANTITY (Scooters) + Monopolistically Competitive Outcome Profit or Loss (?) Given the profit-maximizing choice of output and price, Citrus Scooters is earning sellers in the industry relative to the long-run equilibrium amount. Now consider the long run in which scooter manufacturers are free to enter and…arrow_forward4. A monopolist is faced with the following cost and revenue curves: $ 80 70 60 50 40 30 20 10 0 -10 0 -20 100 200 300 400 FMC 500 AC AR 600 MR Quantity (a) What is the maximum-profit output?. (b) What is the maximum-profit price? (c) What is the total revenue at this price and output? (d) What is the total cost at this price and output? (e) What is the level of profit at this price and output? (f) If the monopolist were ordered to produce 300 units, what would be the market price? (g) How much profit would now be made? (h) If the monopolist were faced with the same demand, but average costs were constant $60 per unit, what output would maximise profit? (i) What would be the price now? (j) How much profit would now be made? (k) Assume now that the monopolist decides not to maximise profits, but instead sets a price of $40. How much will now be sold?.arrow_forwardQuestion 38 An unregulated monopoly finds that its marginal cost exceeds its marginal revenue. In order to increase its profit, the firm will OA. raise its price and move to the segment of the demand line where PED exceeds 1 in absolute value. B. raise its price, increase its output, and move the segment of the demand line above the point where PED equals 1. OC. lower its price, increase its output, and shift to the segment of the demand line where PED exceeds 1 in absolute value. O D.continue to produce this level of output because any change will lower its profit.arrow_forward
- Q5. The graph below represents a monopoly firm. Answer the questions below. ( a. Briefly explain three ways in which pricing can be set with a regulated monopoly and the intended objective of each pricing method.b. Based on the diagram, if this monopoly firm is unregulated, what will be its profit? Show your calculations.c. Based on the diagram, if this firm is regulated based on social interest theory, what will be its profit? Show and explain your calculations.d. Based on the diagram, if this monopoly is subject to rate of return regulation, what will be the new price, output and profit of the firm? Show your calculations with explanations.e. Based on the diagram, if this is a natural monopoly that is allowed to set its price, what will be the minimum it should set in order to make a profit or break even? Explain your answer.arrow_forward(a) What is meant by consumer surplus and producer surplus? Using a diagram show that there is a deadweight loss to society from monopoly in terms of total surplus. (b) In what ways is a monopolistically competitive firm likely to be less efficient than one under perfect competition?arrow_forward5. Conditions for price discrimination Price discrimination is the practice of charging different prices for the same product that are not justified by cost differences. Evaluate the following statement: "Price discrimination requires market segmentation." False, because the monopolist can never charge anyone their maximum willingness to pay anyway False, because the monopolist does not need to know people's willingness to pay for its goods None of these choices True, because the monopolist needs to know the willingness to pay of different groups of consumersarrow_forward
- 7. Monopoly and Price Elasticity Consider the relationship between monopoly pricing and the price elasticity of demand. If demand is inelastic and a monopolist raises its price, total revenue would and total cost would Therefore, a monopolist will produce a quantity at which the demand curve is inelastic. Use the purple segment (diamond symbols) to indicate the portion of the demand curve that is inelastic. (Hint: The answer is related to the marginal- revenue (MR) curve.) Then use the black point (plus symbol) to show the quantity and price that maximizes total revenue (TR). 10 Demand 9 8 Inelastic Demand 7 6 Max TR 3 2 1 -1 -2 Marginal Revenue -3 -4 -5 2 3 4 6 7 8 9 10 Quantityarrow_forwardGRADUATE STUDIES Practice Question 1 The table below shows the demand for a product produced by a monopolist, who has a constant marginal cost and an average total cost of GH¢45.00 per Quantity (thousand's of units) Price (cedis per unit) 0 120 1 105 2 90 3 75 4 60 5 45 6 30 UPSA 25 GRADUATE STUDIES a. Calculate the total revenue and marginal revenue for each level of quantity. b. What are the profit-maximizing level of output and the price of the product? c. Calculate the Lerner Index for the industry.arrow_forward(Figure: The Environmental Monopolist II) Use Figure: The Environmental Monopolist II. If this monopolist perfectly price-discriminates, then it will produce _____ units. This will lead to producer surplus equal to _____, consumer surplus equal to _____, and a deadweight loss equal to _____. O. $35; $1,225; $612.50; $612.50 O. $70; $2,450; $0; $0 O. $50; $1,225; $0; $0 O. $100; $1,500; $612.50; $612.50arrow_forward
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