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Figure 15-3 above shows the demand and cost curves facing a monopolist. Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the price charged at the profit-maximizing/loss-minimizing output level? $75 $38 $68 $54

Figure 15-3 above shows the demand and cost curves facing a monopolist. Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the price charged at the profit-maximizing/loss-minimizing output level? $75 $38 $68 $54

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Figure 15-3 above shows the demand and cost curves facing a monopolist.


Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the price charged at the profit-maximizing/loss-minimizing output level?

$75
$38
$68
$54
 
 
 
The diagram is a standard economic graph illustrating the concept of monopolistic competition. It presents the relationship between price and cost per unit on the vertical axis and quantity on the horizontal axis. The graph includes several key curves: 1. **Demand Curve**: Slopes downward from left to right, indicating that as prices decrease, the quantity demanded increases. 2. **Marginal Revenue (MR) Curve**: Positioned below the demand curve, it also slopes downward, representing the additional revenue generated from selling one more unit. 3. **Marginal Cost (MC) Curve**: Upward-sloping, indicating the cost of producing one more unit. 4. **Average Total Cost (ATC) Curve**: U-shaped and located above the MR curve but intersecting the MC curve at its lowest point. This curve shows the average cost per unit at different levels of output. 5. **Equilibrium Points**: - The intersection of the Demand and MC curves determines the price at which the quantity demanded equals the quantity supplied. - The intersection of the MC and MR curves indicates the profit-maximizing quantity, where marginal cost equals marginal revenue (here at quantity 850). - **Price Points**: - At quantity 630, the price per unit is $75. - At quantity 800, the price per unit is $68. - At quantity 880, the price per unit is $38. This graph demonstrates how monopolistic competitors determine output and pricing based on their cost structures and market demand.
Transcribed Image Text:The diagram is a standard economic graph illustrating the concept of monopolistic competition. It presents the relationship between price and cost per unit on the vertical axis and quantity on the horizontal axis. The graph includes several key curves: 1. **Demand Curve**: Slopes downward from left to right, indicating that as prices decrease, the quantity demanded increases. 2. **Marginal Revenue (MR) Curve**: Positioned below the demand curve, it also slopes downward, representing the additional revenue generated from selling one more unit. 3. **Marginal Cost (MC) Curve**: Upward-sloping, indicating the cost of producing one more unit. 4. **Average Total Cost (ATC) Curve**: U-shaped and located above the MR curve but intersecting the MC curve at its lowest point. This curve shows the average cost per unit at different levels of output. 5. **Equilibrium Points**: - The intersection of the Demand and MC curves determines the price at which the quantity demanded equals the quantity supplied. - The intersection of the MC and MR curves indicates the profit-maximizing quantity, where marginal cost equals marginal revenue (here at quantity 850). - **Price Points**: - At quantity 630, the price per unit is $75. - At quantity 800, the price per unit is $68. - At quantity 880, the price per unit is $38. This graph demonstrates how monopolistic competitors determine output and pricing based on their cost structures and market demand.
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