Question 1 a. Draw the marginal cost and average total cost curves for a typical firm. Explain why the curves have the shapes that they do and why they cross where they do. b. Does a competitive firm's price equal its marinal marginal cost in the short run, in the long run, or both? Explain c. What is the law of diminishing returns and what does it imply about the shape of the firm's average variable cost and marginal cost curves. d. Using the table below indicate which firm has (i) disc.nomiesof scale and (ii) constant returns to scale over the entire range of output. Explain your answer Question 2 a. Apple faces competition from many other firms in the owrld market for mobile phones; therefore, apple cannot have market power. Do ou agree with this statement? b. the mrginal revenue for a perfectly competitive firm is equal to the market price. Why is this not the case for a monopolist? c. A social cost is applied to the monopolist market structure. Why does this occur? If the gains producers achieve from being a monopolist are provided to consumers. Would the social cost of the monopolist be eliminated? d. Describe the two problems that arise when regulators tell a natural monopoly that it must set a price equal to marginal cost.

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Firms In Competitive Markets

Section: Chapter Questions

Problem 4PA

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Question 1

a. Draw the marginal cost and average total cost curves for a typical firm. Explain why the curves have the shapes that they do and why they cross where they do.

b. Does a competitive firm's price equal its marinal marginal cost in the short run, in the long run, or both? Explain

c. What is the law of diminishing returns and what does it imply about the shape of the firm's average variable cost and marginal cost curves.

d. Using the table below indicate which firm has (i) disc.nomiesof scale and (ii) constant returns to scale over the entire range of output. Explain your answer

Question 2

a. Apple faces competition from many other firms in the owrld market for mobile phones; therefore, apple cannot have market power. Do ou agree with this statement?

b. the mrginal revenue for a perfectly competitive firm is equal to the market price. Why is this not the case for a monopolist?

c. A social cost is applied to the monopolist market structure. Why does this occur? If the gains producers achieve from being a monopolist are provided to consumers. Would the social cost of the monopolist be eliminated?

d. Describe the two problems that arise when regulators tell a natural monopoly that it must set a price equal to marginal cost.

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