1. The profit maximizing output for this firm is . 2. In the short-run, this firm will earn $ 3. In the long-run, this firm will earn $ please refer to figure provided ### Understanding Monopoly Pricing: A Graphical AnalysisThis graph represents the pricing and quantity decisions of a monopolistic firm, illustrating key economic concepts such as marginal cost (MC), average total cost (ATC), marginal revenue (MR), and demand.#### Key Components of the Graph:1. **Demand Curve**: The downward-sloping line represents the demand curve. It shows the relationship between the price of the good (on the vertical axis) and the quantity demanded (on the horizontal axis). As the price decreases, the quantity demanded increases, which is typical in most markets.2. **Marginal Cost (MC)**: The MC curve intersects the ATC curve and tends to upward slope, indicating the additional cost incurred by producing one more unit of the good. This curve is crucial as it determines the optimal production point for the monopolist.3. **Average Total Cost (ATC)**: The ATC curve also slopes downwards initially, reaches a minimum, and then starts to slope upwards. This U-shaped curve represents the per-unit cost of production, including both fixed and variable costs.4. **Marginal Revenue (MR)**: The MR curve is downward sloping, lying below the demand curve. It shows how the revenue from selling one more unit changes as output increases. For a monopolist, the MR is lower than the price due to the need to decrease the price to sell more units.#### Points of Intersection and Economic Implications:- The **MC intersects the MR** at **point A** around a quantity of 10 units and a price of $18. This is where the firm maximizes its profit by equating MR to MC, following the profit-maximization rule. - The **MC curve intersects the ATC curve** at around a quantity of 13 units, which is the minimum average total cost.- The **Demand curve intersects the MC curve** at around a quantity of 18 units and a price of $10, indicating the socially optimal level of output where price equals marginal cost.The price and quantity that the monopolist chooses (where MR = MC) do not necessarily lead to allocative efficiency, where the price would equal the marginal cost (as it does in perfectly competitive markets). Instead, the monopolist restricts output and raises prices to maximize profits, often resulting in a deadweight loss to society.This graphical analysis provides a visual understanding of how monopolies operate in setting prices and quantities differently from competitive markets

The monopoly is a market structure which has a single seller and many buyers in the market. The…

Answered: 1. The profit maximizing output for…

1. The profit maximizing output for this firm is . 2. In the short-run, this firm will earn $ 3. In the long-run, this firm will earn $ please refer to figure provided

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Profit maximization using total cost and total revenue curves Suppose Sam runs a small business that manufactures shirts. Assume that the market for shirts is a perfectly competitive market, and the market price is $20 per shirt. The following graph shows Sam's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for the first seven shirts that Sam produces, including zero shirts. TOTAL REVENUE, TOTAL COST, AND PROFIT (Dollars) 200 175 150 125 100 75 50 25 a -25 0 3 6 QUANTITY OF OUTPUT (Shirts) 2 4 5 Total Cost 7 8 O Total Revenue Profit (?)
4. The graph shows the perfect competition market. Price per unit MC ATC $3.00 MR 2.00 1.90 1.00 100 250 300 400 Output per day a. The exhibit shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. The firm will produce output per day. units of b. The exhibit shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. The firm's total revenue per day is: c. The exhibit shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. The firm's total cost per day is: d. The exhibit shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. The firm's total profit per day is:
3. Profit maximization using total cost and total revenue curves Suppose Yakov runs a small business that manufactures teddy bears. Assume that the market for teddy bears is a competitive market, and the market price is $25 per teddy bear. The following graph shows Yakov's total cost curve. Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for teddy bears quantities zero through seven (inclusive) that Yakov produces. Yakov's profit is maximized when he produces teddy bears. When he does this, the marginal cost of the last teddy bear he produces is , which is ___ than the price Yakov receives for each teddy bear he sells. The marginal cost of producing an additional teddy bear (that is, one more teddy bear than would maximize his profit) is , which is than the price Yakov receives for each teddy bear he sells. Therefore, Yakov's profit-maximizing quantity corresponds to the intersection of the…
$50 ATC $45 MC $40 $35 P= MR $30 AVC $25 $20 $15 $10 $5 $0 25 50 75 100 125 Output (Q) The diagram above shows a Perfectly Competitive firm in the short-run. This firm will maximize its profit by choosing the Output (Q) level: Select one: O a 60 O b. 100 O c. 75 O d. 50
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3. Explain where a perfectly competitive firm's marginal revenue curve is located relative to price and demand. 4. What is the optimal output rule for profit maximization? Draw a graph to show the output level where a perfectly competitive firm maximizes profit.
t of 40 40 35 55 30 25 25 20 15 10 5 MC, AC MC AC 9 0 100 200 300 400 500 The graph shows average and marginal cost curves for a typical firm in a perfectly competitive industry in LONG-RUN equilibrium. The long-run equilibrium price of the product is $ In long-run equilibrium the firm will produce units. In long-run equilibrium the firm will earn $ economic profit.
$11.00 MC| $10.00 $9.00 ATC $8.00 $7.00 TRAVCI $6.00 $5.00 $4.00 $3.00 2 3 7 9 10 Quantity of Output (q) Pierre is a photographer in a perfectly competitive market. The graph shown above gives his MC, ATC and AVC curves. Suppose the market price is $10.50. How much profit does Pierre make? 22.5 24 20 O18 S per unit
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4. Profit maximization and shutting down in the short run Suppose that the market for cashmere sweaters is a competitive market. The following graph shows the daily cost curves of a firm operating in this market. 100 90 80 70 60 50 ATC 40 30 AVC 20 MC 10 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of sweaters) PRICE (Dollars per sweater)
Use Figure 11-5 to answer the following question(s). Cost and Revenue In long run equilibrium, this competitive firm will face a price of $6,200 units $10, 250 units $20, 300 units. $16, 300 units. $20 11 71 10 b 6 a Figure 11-5 טן MC MR ATC AVC 200 250 300 Quantity and produce 13
5. Profit maximization and shutting down in the short run The following graph plots daily cost curves for a firm operating in the competitive market for rompers. PRICE (Dollars per romper) 50 45 40 35 30 25 20 15 10 5 0 0 2 MC 27.50 45.00 4 ATC AVC 6 8 10 12 14 QUANTITY (Thousands of rompers) 16 Price Quantity (Dollars per romper) (Rompers) 12.50 18 20 Using the following table, for each price level, calculate the optimal quantity of units for the firm to produce. Using the data from the graph to determine the firm's total variable cost, calculate the profit or loss associated with producing that quantity. Assume that if the firm is indifferent between producing and shutting down, it will choose to produce. (Hint: Select purple points [diamond symbols] on the graph to receive exact average variable cost information.) ? Total Revenue (Dollars) Fixed Cost Variable Cost (Dollars) (Dollars) 135,000 135,000 135,000 Profit (Dollars) If the firm shuts down, it must incur its fixed costs (FC)…