The accompanying figure shows the demand curve, marginal revenue curve, marginalcost eurve and average total cost curve for a monopolist.30282624222018-16ATC1210-MC4MR236910Quantity (units/day!1) This monopolist maximizes its profit by producingcharging a price of4units per day and18per unit2) The socially optimal level of output is8units per day.3) At this monopolist s profit-maximizing level of output what is its economicprofit or loss?The economie loss is $-72 at the profit maximizing level.4) At his monopolist's socially optimal level of output, what is its economic profitor loss?The Economic loss is $-64 at the socially optimal level.5) At this monopolist's profit-maximizing level of output what the deadweightloss to society!14 of 118 wordsFocus31பொ/து *uu

Question
Asked Oct 31, 2019
356 views

5. At this monopolist’s profit-maximizing level of output what the deadweight loss to society?

The accompanying figure shows the demand curve, marginal revenue curve, marginal
cost eurve and average total cost curve for a monopolist.
30
28
26
24
22
20
18-
16
ATC
12
10
-MC
4
MR
2
3
6
9
10
Quantity (units/day!
1) This monopolist maximizes its profit by producing
charging a price of
4
units per day and
18
per unit
2) The socially optimal level of output is
8
units per day.
3) At this monopolist s profit-maximizing level of output what is its economic
profit or loss?
The economie loss is $-72 at the profit maximizing level.
4) At his monopolist's socially optimal level of output, what is its economic profit
or loss?
The Economic loss is $-64 at the socially optimal level.
5) At this monopolist's profit-maximizing level of output what the deadweight
loss to society!
14 of 118 words
Focus
31
பொ/து *uu
help_outline

Image Transcriptionclose

The accompanying figure shows the demand curve, marginal revenue curve, marginal cost eurve and average total cost curve for a monopolist. 30 28 26 24 22 20 18- 16 ATC 12 10 -MC 4 MR 2 3 6 9 10 Quantity (units/day! 1) This monopolist maximizes its profit by producing charging a price of 4 units per day and 18 per unit 2) The socially optimal level of output is 8 units per day. 3) At this monopolist s profit-maximizing level of output what is its economic profit or loss? The economie loss is $-72 at the profit maximizing level. 4) At his monopolist's socially optimal level of output, what is its economic profit or loss? The Economic loss is $-64 at the socially optimal level. 5) At this monopolist's profit-maximizing level of output what the deadweight loss to society! 14 of 118 words Focus 31 பொ/து *uu

fullscreen
check_circle

Expert Answer

Step 1

5)
The deadweight loss is the economic efficiency lost whiles the profit maximization of the monopolist or any other form of imperfect competition in the market. The part of the consumer surplus which is not converted into the producer surplus and lost forever is the deadweight loss to the society.

Step 2

The socially optimum level of production is identified at the 8 units per day whereas the monopolist makes his output decision at the point of 4 units per day. Thus, there comes a triangle area above the marginal cost curve and below the demand curve which represents the deadweight loss in this case. The deadweight loss can be illustrated as follows:

help_outline

Image Transcriptionclose

30 28 26 24 22 20 18 16 АTC 14 12 10 8 6 в 4 MR 2 2 3 4 5 7 8 9 10 1 Quantity (unitsjday) MC

fullscreen
Step 3

The deadweight loss can be calculated by calculating the area of the triangle ABC which can be done by multiplying the base with height and then with 0.5. The base value is calculated to be the difference between the socially optimal ...

help_outline

Image Transcriptionclose

1 (Socially optimal output -Monopoly output)x 2 (Monopoly price -Marginal cost) Deadweight loss=x 2x(8-4)x (18-6) 1 =-x4x12 2 = 24

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Economics

Other

Related Economics Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: The country of Opalia produces two goods: footballs and basketballs. Below is a table showing prices...

A: We are authorized to answer three subparts at a time, since you have not mentioned which part you ar...

question_answer

Q: The following graph shows the supply of and demand for capital in a market over the last year. You c...

A: Answer -  The market interest rate increased by 2.0%, and the amount of capital  borrowed " decrease...

question_answer

Q: How does microeconomics relate to macroeconomics?

A: Economics is the study of allocation  of limited resources. It has two branches.MicroeconomicsMacroe...

question_answer

Q: Show that the two utility functions given below generate identical demand functions for goods X and ...

A: Two utility functions are given which are:

question_answer

Q: a) Suppose you put $350 into a bank account today. Interest is paid annually and the annual interest...

A: (a)Initial deposit = $350Interest rate = 6 percent per annumTime period = 4 yearsTo determine: Futur...

question_answer

Q: Using the aggregate demand and aggregate supply model, explain the effects of the following on price...

A: (a) The statement “Consumers are worried with the country’s economic progress” is indicating that, p...

question_answer

Q: Can you help me with 4 and 5

A: At socially optimal level, output is produced at a point where price equals marginal cost. 

question_answer

Q: Which of the following is always true?A) When marginal costs are less than average total costs, aver...

A: Below are the cost curves: (Sorry it’s a free hand diagram so it is not very neat)

question_answer

Q: substitute good, increases, while all other factors remain constant. Explain the change(s) in the eq...

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