Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 12.4, Problem 3QQ
To determine
Economic profit.
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Q: Does a monopolist firm always earn abnormal profit? Yes/No. Explainy your answer theoretically and graphically.
monopolistās profit-maximizing output is 500 units per week and it sells its output at a price of $70 per unit. The firmās total costs are $15,000 per week. The firm is maximizing its profit, and it earns $40 in extra revenue from the sale of the last unit produced each week. a. What are the firm's weekly economic profits?
Answer parts a-c plz
total cost= 100+2q2
marginal cost = 4q
market demand curve = 90-2q
monopolistās marginal revenue curve = 90-4q
Part a) What is the quantity, profit, and price of the monopoly?
Part b) Assuming a competetive industry, what is quanity, price, and profit? (P=MC can be used for perfect competition)
Part c) What is the price elasticity of demand at the monopoly price and quantity? What does this mean in context?
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- 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?arrow_forwardThere is a monopolist,ConcreteMex,in the concretemarketin Mexico. The demand function is QD= 100ā50p. The marginal cost of production isc=0.4. (referencing) Question 1.3 ConcreteMex claimed the high price is due to high transportation costs and persuaded the government to help cut down the costs. As a result, for every unit of concrete sold, the government subsidizes ConcreteMex 0.2dollars. What are the new profit-maximizing price and production levels for ConcreteMex? Under the subsidy policy and the new price in Question 1.3, calculate the consumer surplus, producer surplus, and deadweight loss. You do not need to consider government spending for the deadweight loss.arrow_forwardTrue of False: A monopolist selling cars in New York finds it unprofitable to raise price by 10% above the current level. Thus, the relevant market is cars in New York.arrow_forward
- A monopolist is faced with the following cost and revenue curves:(picture) a.What is the maximum-profit price and output,total revenue, total cost and profit? b.If the monopolist were ordered to produce 300 units, what would be the market price and how much profit would now be made c.If the monopolist were faced with the same demand, but average costs were constant at Ā£60 per unit, what output would maximise profit? What would be the price now?................................................................................................. (j)Ā Ā Ā Ā How much profit would now be made? ................................................................................... Ā (k)Ā Ā Ā Assume now that the monopolist decides not to maximise profits, but instead sets a price of Ā£40. How much will now be sold? .................................................................................................................................................. Ā (l)Ā Ā Ā Ā What is the marginal revenue at thisā¦arrow_forwardGive typing answer with explanation and conclusionĀ A monopolist has a demand curve given by P = 88 ā Q and a total cost curve given by TC = 34 + Q2. The associated marginal cost curve is MC = 2Q. Suppose the monopolist also has access to a foreign market in which he can sell whatever quantity he chooses at a constant price of 60. How much will he sell in the foreign market? What will his new quantity and price be in the original market?arrow_forwardWhich of the following is true? a) A monopolist produces on the inelastic portion of its demand. b) A monopolist always earns an economic profit. c) The more inelastic the demand, the closer marginal revenue is to price. d) In the short run a monopoly will shutdown if P < AVC. Ā here, part d is correct. I need an explanation why the first three options are incorrect and how we can correct them.arrow_forward
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