3. Explain in details whether the underlined part of statement is true or false In a monopoly market, as long as marginal cost of production is lower than the product price, firms should increase the quantity of outputs produced in order to maximize (minimize) their profits (losses).

3. Explain in details whether the underlined part of statement is true or false In a monopoly market, as long as marginal cost of production is lower than the product price, firms should increase the quantity of outputs produced in order to maximize (minimize) their profits (losses).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTION 3 In the short run, each of the 5 firms in some industry faces a capacity constraint and constant marginal and average costs until this capacity is reached (see the table below). Firm 1 Firm 2 Firm 3 Firm 4 Firm 5 Marginal Cost = Average Cost $50 $60 $65 $75 $90 Assuming that no firm has monopoly (pricing) power, what will be the quantity supplied at a price of (a) $45 (b) $55 (c) $70 (d) $100 Maximum output 80 60 30 40 25
1) A firm is considering buying a patent that would give it a monopoly over sale of a new drug. If it buys the patent, the demand curve is it would face for its product is P = 10 – q, and it would have zero marginal costs of production and no other fixed costs. If the firm anticipates setting a single price to all consumers, what is the most that it would be willing to pay for the patent? 2) A firm is considering buying a patent that would give it a monopoly over sale of a new drug. If it buys the patent, the monopolist’s demand curve would be P = 10 – q, and it would have zero marginal costs of production and no other fixed costs. The firm also anticipates that the government will regulate the market in the following way: the government will set a maximum price of $4 per unit. In addition, the government will provide a subsidy to the monopolist equal to the increase in consumer surplus between the outcome in which the monopolist sets its profit-maximising price and in the market with…
1. Suppose the inverse demand for a product produced by a single firm is given by P = 100 - 10Q and the firm has a marginal cost of production of MC = 10 + 10Q. a. If the firm cannot price discriminate, what is the profit-maximizing price and level of output? b. If the firm cannot price discriminate, what are the levels of producer and consumer surplus in the market? What is the deadweight loss? c. If the firm is able to practice perfect price discrimination, what output level would it choose? What are the levels of producer and consumer surplus and deadweight loss under perfect price discrimination?
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Assume a market for petroleum products, and let D denote the demand of petroleum products while MC the marginal cost. The inverse demand is p = 100 - q, and the MC is MC = q.a. Use a figure to depict the competitive outcome assuming many producer and many consumers. Derive the competitive equilibrium outcome.b. Use a second figure to explain the monopoly solution assuming a single seller. Derive the monopoly solution.
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