24-7 Key Terms and Conceptscartel (588)monopolist (585)natural monopoly (586)Problems24-1. An international coffee cartel has established a priceabove the perfectly competitive price. The number ofcountries not in the cartel has grown in recent years,however. Explain the likely effect of this trend on theprospects for maintaining a successful cartel.24-2. Discuss the difference in the price elasticity of demandfor an individual firm in a perfectly competitive indus-try as compared with a monopolist. Explain, in eco-nomic terms, why the price elasticities are different.24-3. The following table depicts the daily output, price,and costs of the only dry cleaner located near the cam-pus of a small college town in a remote location. Thedry cleaner is effectively a monopolist.Output(suitscleaned)02345678a. Compute revenues and profits at each output level.b. What is the profit-maximizing level of output?price differentiation (599)price discrimination (598)Price per Suit($)8.007.507.006.506.005.505.004.504.00Total Costs($)3.006.008.5010.5011.5013.5016.0019.0024.0024-4. Given the information in Problem 24-3, calculate thedry cleaner's marginal revenue and marginal cost ateach output level. Based on marginal analysis, what isthe profit-maximizing level of output?24-5. A manager of a monopoly firm notices that the firm isproducing output at a rate at which average total costis falling but is not at its minimum feasible point. Themanager argues that surely the firm must not be max-imizing its economic profits. Is this argument correct?Dollars per Unit24-6. Referring to the accompanying diagram, answer thefollowing questions.8.00a. What is monopolist's profit-maximizing output?b. At the profit-maximizing output rate, what are themonopolist's average total cost and average revenue?c. At the profit-maximizing output rate, what are themonopolist's total cost and total revenue?d. What is the maximum profit?6.00CHAPTER 24 Monopoly5.004.50price searcher (593)tariffs (588)3.005,000605MRMCATC8,000Units per Period24-7. Using the diagram for Problem 24-6, suppose that themarginal cost and average total cost curves also illus-trate the horizontal summation of the firms in a com-petitive industry in the long run. What would themarket price and equilibrium output be if the marketwere competitive? Explain the economic cost to soci-ety of allowing a monopoly to exist in this industry.24-8. The marginal revenue curve of a monopoly producercrosses its marginal cost curve at $30 per unit, whichcorresponds to an output level of 2 million units. Theprice that consumers are willing and able to pay for thisoutput is $40 per unit. If it produces this output level, thefirm's average total cost is $43 per unit, and its averagefixed cost is $8 per unit. What is this monopoly produc-er's profit-maximizing (loss-minimizing) output level?WHAT ARE THE FIRM'S ECONO-MIC PROFITS (OR ECONOMICLOSSES? EXPLAIN

Monopolist: A monopolist is a single seller in the market and hence he faces the downward sloping…

24-6. Referring to the accompanying diagram, answer the following questions. a. What is monopolist's profit-maximizing output? b. At the profit-maximizing output rate, what are the monopolist's average total cost and average revenue? c. At the profit-maximizing output rate, what are the monopolist's total cost and total revenue? d. What is the maximum profit? Dollars per Unit 8.00 6.00 5.00 4.50 3.00 MR 5,000 8,000 MC Units per Period ATC

24-6. Referring to the accompanying diagram, answer the following questions. a. What is monopolist's profit-maximizing output? b. At the profit-maximizing output rate, what are the monopolist's average total cost and average revenue? c. At the profit-maximizing output rate, what are the monopolist's total cost and total revenue? d. What is the maximum profit? Dollars per Unit 8.00 6.00 5.00 4.50 3.00 MR 5,000 8,000 MC Units per Period ATC

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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