The following graph shows demand, MR, and cost curves for a monopoly in theshort run:1211SMC10ATC8AVC2110 20 30 40 50 60 70 80 90 100 110 120OutputMRa. Profit is maximized at a price of $–b. The profit-maximizing level of output isc. At the optimal level of output, total revenue is $-and profit is $-total cost is $-d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (i.e.,P - ATC) be larger or smaller than when price is set at the optimal level in part c?(Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal-ysis, explain why this happens.Price, marginal revenue, and cost (dollars)

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a. Profit is maximized at a price of $- b. The profit-maximizing level of output is c. At the optimal level of output, total revenue is $– and profit is $- d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (i.e., P – ATC) be larger or smaller than when price is set at the optimal level in part c? (Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal- ysis, explain why this happens. total cost is $_

a. Profit is maximized at a price of $- b. The profit-maximizing level of output is c. At the optimal level of output, total revenue is $– and profit is $- d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (i.e., P – ATC) be larger or smaller than when price is set at the optimal level in part c? (Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal- ysis, explain why this happens. total cost is $_

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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