Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Question
Chapter 24, Problem 15CQ
To determine
Long run cost conditions in an industry.
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Use the graph to answer the following 5 questions. A single priced unregulated monopolist faces the
demand curve and has the cost curves illustrated in the diagram below.
1. What is the profit
Price
maximizing quantity of
output?
70
a) 25 units.
b) 40 units.
c) 50 units.
d) 60 units.
60
e) 70 units.
f) 80 units
g) 90 units
Marginal Cost
50
2. What price does this
monopolist charge?
a) $58
b) $20
40
Average
Total
Cost
c) $35
d) $30
e) $45.
f) $50
30
g) $40
h) $38
3. What are the total profits?
a) $1200
b) $0
c) $1250
d) $200
e) $250.
f) $2250.
g) $150
h) $1600
20
10
Demand
20
40
60
80
100
120 140 160
Quantity
A monopolist has a demand curve given by Q=100-P and a total cost curve given by TC= Q2 + 16.
a.Find the monopolist’s profit maximizing quantity and price. Indicate them on the graph.
b.How much economic profit will the monopolist earn?
c. Calculate the price elasticity of demand at the equilibrium price level.
I will rate and like, thank you! Easy economics question.
Create graph that includes:
Demand curve, marginal cost, and marginal revenue.
Identify the profit-maximizing quantity and price for this monopolist. To do this you will need to determine marginal revenue at each level of output. Choose output that satisfies the monopolist’s profit maximizing condition of MR = MC.
Does this firm earn a profit? How much profit if they do?
Chapter 24 Solutions
Economics: Private and Public Choice
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Similar questions
- Suppose both a monopolist and a perfectly competitive firm charge a price corresponding to the quantity at the intersection of the marginal cost and marginal revenue curves. If this price is between each firm's average variable cost and average total cost curves, a. both firms will shut down in the short run. b. both firms will continue to operate in the short run. c. the perfectly competitive firm will continue to operate in spite of the loss but the monopolist will earn a profit. d. the perfectly competitive firm will continue to operate in the short run but the monopolist will shut down.arrow_forwarda. Draw the cost curves for a typical firm. Explain how a competitive firm chooses the level of output that maximizes profit. At that level of output, show on your graph the firm's total revenue and total cost. b. Draw the demand curve, marginal revenue curve, average total cost curve, and marginal-cost curve for a monopolist. Show the profit-maximizing level of output, the profit-maximizing price, and the amount of profit. c. Why the demand curve for a firm operating in monopolistic competition is more elastic compared to the firm operating as a monopoly.arrow_forwarda. Draw the cost curves for a typical firm. Explain how a competitive firm chooses the level of output that maximizes profit. At that level of output, show on your graph the firm’s total revenue and total cost. b. Draw the demand curve, marginal revenue curve, average total cost curve, and marginal-cost curve for a monopolist. Show the profit-maximizing level of output, the profit-maximizing price, and the amount of profit. c. Why the demand curve for a firm operating in monopolistic competition is more elastic compared to the firm operating as a monopoly. Kindly answer all the sub parts.arrow_forward
- Which one of the following is the best description of a monopolist? a.a firm that is the sole producer of a product for which there are no good substitutes in a market with high barriers to entry b.a firm that is the sole producer of a narrowly defined product class, such as yellow, grade-A butter produced in Wisconsin c.a firm that is large relative to its competitors d.a firm that produces a single productarrow_forwardFor a monopolist to produce one more unit of output, Select one: a. the price must be equal to the marginal cost b. the difference of total revenue gained and total revenue lost must be greater than zero c. the price must be equal to the average variable cost. d. demand must be in the in inelastic range of the demand curve e. the difference of the price and marginal revenue must be equal to zeroarrow_forwardWhat is the profit maximizing/ loss minimizing quantity of output? How do you know? Explain. What is the maximum price the monopolist can charge? Is this monopolist making economic profit or economic loss? How do you know? Explain. Show the economic profit/loss on the graph. Calculate the firms profit or lossarrow_forward
- a. Why is a monopolist’s marginal revenue less than the price of its good? Can marginal revenue ever be negative? Explain. b. Draw the demand, marginal-revenue, average total-cost, and marginal-cost curves for a monopolist. Show the profit-maximizing level of output, the profit-maximizing price, and the amount of profit. c. Describe the two problems that arise when regulators tell a natural monopoly that it must set a price equal to marginal cost.arrow_forwardComparing Monopoly to Competitor. In each case, circle the one that is greater. Output: Monopolist / Competitor Price: Monopolist / Competitor Profit: Monopolist / Competitorarrow_forwardSuppose the table below presents the demand schedule of the sole medicine manufacturer in the country. The marginal and average cost of the monopolist is constant at 5. Quantity Price 10 1 8 3 7 4 7 8. 6. 10 What is the profit maximizing quantity and price? Please show how you got your answer. 6 4.arrow_forward
- economicsarrow_forwardQuestion 3 Draw the demand, marginal revenue, average total cost, and marginal cost curves for a pure monopolist. Show the profit - maximizing level of output, the profit - maximizing price, and the amount of profit.arrow_forwardA monopolist has a demand curve given by Q=100-P and a total cost curve given by TC= Q2 + 16. a. Find the monopolist's profit maximizing quantity and price. Indicate them on the graph. 6. How much economic profit will the monopolist earn? Calculate the price elasticity of demand at the equilibrium price level.arrow_forward
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