The following graph shows demand, MR, and cost curves for a monopoly in theshort run:1211SMC10ATC8AVC2110 20 30 40 50 60 70 80 90 100 110 120OutputMRa. Profit is maximized at a price of $–b. The profit-maximizing level of output isc. At the optimal level of output, total revenue is $-and profit is $-total cost is $-d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (i.e.,P - ATC) be larger or smaller than when price is set at the optimal level in part c?(Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal-ysis, explain why this happens.Price, marginal revenue, and cost (dollars)

Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

a. Profit is maximized at a price of $- b. The profit-maximizing level of output is c. At the optimal level of output, total revenue is $– and profit is $- d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (i.e., P – ATC) be larger or smaller than when price is set at the optimal level in part c? (Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal- ysis, explain why this happens. total cost is $_

a. Profit is maximized at a price of $- b. The profit-maximizing level of output is c. At the optimal level of output, total revenue is $– and profit is $- d. If the manager mistakenly sets price at $10 and sells 20 units, will profit margin (i.e., P – ATC) be larger or smaller than when price is set at the optimal level in part c? (Note: Average total cost is $8.75 when 20 units are produced.) Using marginal anal- ysis, explain why this happens. total cost is $_

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter13: Monopoly And Antitrust

Section: Chapter Questions

Problem 7P

See similar textbooks

Similar questions

From the graph you drew to answer Exercise 11.6, would you say this transit system is a natural monopoly? Justify. Use the following information to answer the next three questions. In the years before wireless phones, when telephone technology requited having a wile matting to every home, it seemed plausible that telephone service had diminishing average costs and might require regulation like a natural monopoly. For most of the twentieth century, the national U.S. phone company was AT&T, and the company functioned as a regulated monopoly. Think about the deregulation of the U.S. telecommunications industry that has occurred over the last few decades. (This is not a research assignment, but a thought assignment based on what you have learned in this chapter.)
If a monopoly firm is earning profits, how much would you expect these profits to be diminished by entry in the long run?
In the middle of the twentieth century, major U.S. cities had multiple competing city bus companies. Today, there is usually only one and it runs as a subsidized, regulated monopoly. What do you suppose caused the change?
Imagine a monopolist could charge a different price to every customer based on how much he or she were willing to pay. How would this affect monopoly profits?
Draw a monopolists demand curve, marginal revenue, and marginal cost curves. Identify the monopolists profit-maximizing output level. Now, think about a slightly higher level of output (sayQ0+1). According to the graph, is there any consumer willing to pay more than the marginal cost of that new level of output? If so, what does this mean?
Imagine that you ale managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10 less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?
If the transit system were allowed to operate as an unregulated monopoly, what output would it supply and what price would it charge?
How does the quantity produced and price charged by a monopolist compare to that of a perfectly competitive film?
What is a legal monopoly?
What is the usual shape of a marginal revenue cuwe for a monopolist? Why?
What is a natural monopoly?
Is a monopolist a price taker? Explain briefly.