Consider an industry with the demand curve (D) and marginal cost curve (MC) shown in the accompanying diagram. There is no fixed cost. If the industry is a single-price monopoly, the monopolist’s marginal revenue curve would be MR. Answer the following questions by naming the appropriate points or areas. The horizontal axis is labeled Quantity, and the vertical axis is labeled Price. The quantities marked along the horizontal axis, from left to right, are I, M, S, and T. The prices marked along the vertical axis, from top to bottom, are A, B, C, and E. The M C curve is a horizontal line that extends from Price E marked along the vertical axis. A point L is marked on the M C curve, where quantity is M and price is E. The demand curve is a negative slope line that extends from price A, intersects the M C curve at a point R, and ends at quantity T on the horizontal
Consider an industry with the demand curve (D) and marginal cost curve (MC) shown in the accompanying diagram. There is no fixed cost. If the industry is a single-price
The horizontal axis is labeled Quantity, and the vertical axis is labeled Price. The quantities marked along the horizontal axis, from left to right, are I, M, S, and T. The prices marked along the vertical axis, from top to bottom, are A, B, C, and E. The M C curve is a horizontal line that extends from Price E marked along the vertical axis. A point L is marked on the M C curve, where quantity is M and price is E. The demand curve is a negative slope line that extends from price A, intersects the M C curve at a point R, and ends at quantity T on the horizontal axis. Point R is marked, where quantity is S and price is E. Two more points, F and K, are marked on the demand curve, where F is at (I, B), and K is at (M, C). The M R curve is a negative slope line that extends from Price A, intersects the M C curve at a point H, and ends at quantity M on the horizontal axis. Point H is marked at (I, E). Point G is marked between the demand and M R curves at (I, C). Points N, O, and J, are marked above the demand curve at the coordinates (S, B), (S, C), and (M, B), respectively.
- If the industry is
perfectly competitive , what will be the total quantity produced? At what price? - Which area reflects
consumer surplus under perfect competition? - If the industry is a single-price monopoly, what quantity will the monopolist produce? Which price will it charge?
- Which area reflects the single-price monopolist’s profit?
- Which area reflects consumer surplus under single-price monopoly?
- Which area reflects the
deadweight loss to society from single-price monopoly? - If the monopolist can
price-discriminate perfectly, what quantity will the perfectly price-discriminating monopolist produce?
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