**Analysis of Monopolistic Market Graphs**This graph illustrates the economic concepts of demand (D), average total cost (ATC), marginal revenue (MR), and marginal cost (MC) for a monopolistic firm. Here's a detailed breakdown of each component:### Graph Components1. **Axes**: - The x-axis represents the quantity of output. - The y-axis represents cost and revenue.2. **Demand (D)**: - This curve shows the relationship between the price of a good and the quantity demanded. - Downward sloping, indicating that as the price decreases, the quantity demanded increases.3. **Marginal Revenue (MR)**: - This curve indicates the additional revenue the firm earns from selling one more unit. - Lies below the demand curve because, in monopoly, reducing the price to sell additional units decreases the revenue from existing units.4. **Average Total Cost (ATC)**: - Represents the average cost of producing each unit. - Initially high, decreasing as output increases due to economies of scale, then potentially rising again.5. **Marginal Cost (MC)**: - The cost of producing one additional unit. - Intersects the ATC at its lowest point, indicating the most efficient scale of production.### Analysis- **Point A**: - Place box A on the graph under the following condition: no regulation is in place. - Represents the profit zone where the MR and MC curves intersect.- **Point B**: - Place box B on the graph when marginal cost pricing is imposed. - This point indicates the new equilibrium under regulation, often where the MC and D curves intersect, possibly leading to changed profits or losses.These elements help explain how monopolistic firms balance costs and revenues under different regulatory conditions and how economic outcomes are affected. Understanding these principles is key to grasping market dynamics in monopolies. c. Which is the most likely approach the regulatory agency will take to improve efficiency in this market?- ◯ The firm will sell stock to raise revenue.- ◯ The government will take control of the firm.- ◯ The government will require the firm to set the price equal to average total cost.- ◯ The government will allow the firm to maximize profits, regardless of any losses to societal welfare.

Monopoly firms maximize profit where MC=MR And producing less qty than perfect competitive output and charging more price than that of perfect competition. a.) Before regulation Monopoly's equilibrium MC=MR ( at 6 output level ) Where Price = 8 , MC= 2 and AC= 7 Profit = (P- AC)×Q = 6 this is the maximum profit case Monopoly can make . After regulation :- b.) Govt impose single price equal to MC (P = MC ) At this level firms AC = 7 and P = 2 and Q = 6( equilibrium qty) Profit = ( P - AC ) ×Q = -30 which is LOSS . c ) socially optimal output level is the efficiency condition . Where MC= AR P= 2 , Q= 12 and AC = 4 Profit = ( P - AC ) ×Q = -24 which is LOSS . In this case option 3 is absolutely correct Which says Firm will be allowed to charge its price equal to AC ( P= AC ) this is the case of NORMAL PROFIT as perfect competition firm earn

Business

Economics

Consider the graph of demand (D), average total cost (ATC), marginal revenue (MR), and marginal cost (MC) for a monopolistic firm. a. Assume no regulation is in place. Place box A on the graph to represent the profit or loss for the firm before regulation. b. Now assume marginal cost pricing is imposed. Place box B on the graph to represent the profit or loss for the firm after marginal cost pricing is imposed. 20 19 I A 18 17 I B 16 15 14 13 11 10 8 6 5 4 АТС -MC 3 1 AMR 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Cost and Revenue

Consider the graph of demand (D), average total cost (ATC), marginal revenue (MR), and marginal cost (MC) for a monopolistic firm. a. Assume no regulation is in place. Place box A on the graph to represent the profit or loss for the firm before regulation. b. Now assume marginal cost pricing is imposed. Place box B on the graph to represent the profit or loss for the firm after marginal cost pricing is imposed. 20 19 I A 18 17 I B 16 15 14 13 11 10 8 6 5 4 АТС -MC 3 1 AMR 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Cost and Revenue

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Not image answer please.
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