A monopolist produces an output level Q1 = 200 where marginal revenue is equal to marginal cost. At this output level, the price is P1 = $300 and the average total cost is ATC1 = $250. The monopolist has the following revenue and cost levels: • Marginal cost curve intersects the marginal revenue curve at $100. • Marginal revenue is $0 at Q2 = 400. • Marginal cost curve intersects the demand curve at P3 = $270 and Q3 = 320. 1. Draw the graph for the monopolist (include ATC, D, MC, and MR curves). Label everything! 2. At this output of Q1 = 200, calculate total revenue (TR), total cost (TC), and profit. Show your work (formulas and calculations). 3. Let’s compare the monopoly outcome with the perfectly competitive outcome. In monopoly, the firm produces Q = ________ and charges a price P = $_______. If this was perfect competition, the market would produce Q = ________ and charge a price P = $_______. Which market is more efficient and why? (hint: economic welfare) Obs: Monopoly = market structure, industry. Monopolist = the firm in monopoly.
A monopolist produces an output level Q1 = 200 where marginal revenue is equal to marginal cost. At this output level, the price is P1 = $300 and the
• Marginal cost curve intersects the marginal revenue curve at $100.
• Marginal revenue is $0 at Q2 = 400.
• Marginal cost curve intersects the demand curve at P3 = $270 and Q3 = 320.
1. Draw the graph for the monopolist (include ATC, D, MC, and MR curves). Label everything!
2. At this output of Q1 = 200, calculate total revenue (TR), total cost (TC), and profit. Show your work (formulas and calculations).
3. Let’s compare the
Obs: Monopoly = market structure, industry. Monopolist = the firm in monopoly.
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