Use the following graph to answer the question that follow: a) What is the monopolist’s profit maximizing output? b) At the profit maximizing output rate, what are average total cost and average revenue? c) At the profit maximizing output rate, what are the monopolist’s total cost and total revenue? d) What is the maximum profit? e) Suppose that the marginal cost and average total cost curves in the diagram also illustrate the horizontal summation of the firms in a perfectly competitive industry in the long run. What would the equilibrium price and output be if the market were perfectly competitive? Explain the economic cost to society of allowing a monopoly to exist. Concept Introduction: Revenue: Total amount received by product sales. . Profit: Profit is the difference between total revenue earned by selling the product and total cost incurred by producing the item. Marginal revenue: Marginal revenue is the extra revenue earned by selling an extra unit of the product. Marginal cost: Marginal cost is the extra cost incurred for producing one extra unit of the commodity.

Question

Want to see the full answer?

Answer 1

Question

Chapter 24, Problem 3P

To determine

Use the following graph to answer the question that follow:

a) What is the monopolist’s profit maximizing output?

b) At the profit maximizing output rate, what are average total cost and average revenue?

c) At the profit maximizing output rate, what are the monopolist’s total cost and total revenue?

d) What is the maximum profit?

e) Suppose that the marginal cost and average total cost curves in the diagram also illustrate the horizontal summation of the firms in a perfectly competitive industry in the long run. What would the equilibrium price and output be if the market were perfectly competitive? Explain the economic cost to society of allowing a monopoly to exist.

Concept Introduction:

Revenue: Total amount received by product sales. .

Profit: Profit is the difference between total revenue earned by selling the product and total cost incurred by producing the item.

Marginal revenue:

Marginal revenue is the extra revenue earned by selling an extra unit of the product.

Marginal cost:

Marginal cost is the extra cost incurred for producing one extra unit of the commodity.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Key shortcomings of the Human Capital approach to measuring the monetary value of benefits of new treatments are that it Will generate lower benefits for male lives on average Will generate higher benefits for female lives on average Will tend to OVERVALUE improvements in quality of life Will tend to UNDERVALUE improved survival for people out of labour force

One of the key concepts in economics that underpins the necessity of making tough choices and confronting difficult tradeoffs through some form of collective decision-making is called Production Consumption Exchange Equity Scarcity

Allocative efficiency WITHIN the health care sector refers to What mix of nonmedical and medical goods and services should be produced in the macro-economy What mix of medical goods and services should be produced in the health economy What specific health care resources should be used to produce the chosen medical goods and services Who should receive the medical goods and services that are produced