a) Using the following graph state the price and quantity the firm will be at if the monopolymarket is in long run equilibrium. Explain why the firm will be at that price and quantity.PriceMCP3ATCAVCP2P1PoDQoMRQuantityb) State the conditions that establish the market structure monopoly, and the conditionsneeded for price discrimination and why firms price discriminate.

a. The monopoly is the market condition in which there will be only a single seller in the market selling the commodity in the market. The profit maximizing output under monopoly is obtained at the point where the marginal revenue equals the marginal cost and extending this point to meet the demand curve in the economy. From the graph, the point where the MR equals MC is obtained at Qd output and this point meets the demand curve at the price level of P3. Thus, the profit maximizing price in the oligopoly market is P3 and the profit maximizing output is Qd.b. The conditions that should be present in the economy to make the market an example for the monopoly are as follows: There should be only a single seller in the market for the commodity. There should be no contact with the other markets in order for the successful implementation of monopoly power. There will be price discrimination in the market. The demand curve of the monopolist will be a downward sloping curve.Price discrimination is a salient feature of imperfect markets and the monopoly is the best example for the imperfect market. The firms in the monopoly market will price discriminate because of the fact that the seller is possible to divide the market into at least two sub-markets. The other important requirement for price discrimination is that the price elasticity of the product must be different for different customers. The monopolist price discriminates because of the fact that the monopolist is the one who sets the price level and sets the price in order to maximize the profit from each consumer.

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a) Using the following graph state the price and quantity the firm will be at if the monopoly market is in long run equilibrium. Explain why the firm will be at that price and quantity. Price MC P3 ATC AVC P2 P1 Po MR Quantity b) State the conditions that establish the market structure monopoly, and the conditions needed for price discrimination and why firms price discriminate.

a) Using the following graph state the price and quantity the firm will be at if the monopoly market is in long run equilibrium. Explain why the firm will be at that price and quantity. Price MC P3 ATC AVC P2 P1 Po MR Quantity b) State the conditions that establish the market structure monopoly, and the conditions needed for price discrimination and why firms price discriminate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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