Answered: 5. The allocatively efficient quantity…

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

5. The allocatively efficient quantity of product Z for the whole market is 2 million units. At that quantity, the demand for Z is at $5 and the average total cost for its single supplier is $7. The average total cost does not fall to $5 until 3.5 million units. Based on this data, the market for product Z is

perfectly competitive

a natural monopoly

a legal monopoly

monopolistically competitive

productively efficient

7.If a monopolist begins to engage in perfect price discrimination where previously it charged a single price for all its customers, what would be true of its production figures? (2 points)

Firm produces more; producer surplus increases; deadweight loss increases

Firm produces less; charges higher price; economic surplus decreases

Firm produces more; total economic surplus increases; consumer surplus disappears

Firm loses allocative efficiency; charges lower price; deadweight loss decreases

Firm reaches allocative efficiency; producer surplus decreases; consumer surplus increases

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