Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 9, Problem 2MC
To determine
The shape of the demand curve.
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Draw the graph for a monopoly earning a positive economic profit. Suppose the government institutes a per unit tax on the good produced by the monopoly (consider the impact it will have on the cost curves). On the graph, show how this will affect the monopoly’s profit maximizing level of output and the price charged by the monopoly.
Draw and Label Price Axis, Quantity Axis, Demand Curve, Marginal Revenue Curve, Marginal Cost Curve, Average Total Cost Curve, New Marginal Cost Curve, New ATC Curve, Qm, MR=MC, MR=MC1 Qm1, Pm, Pm1, ATC point, ATC1 point, Deadweight Loss, Total Revenue, Total Cost, Profit
Monopoly firms are a lot more profitable than perfectly competitive firms. The primary reason is that the monopoly firm charges a price that is greater than marginal cost at the profit maximizing quantity. Explain this statement with a graph. Specifically, explain how the profit maximizing quantity and price are determined.
Use the cost and revenue data to answer the questions.
Quantity
Price
Total revenue
Total cost
10
90
900
675
15
80
1200
825
20
70
1400
1025
25
60
1500
1250
30
50
1500
1500
35
40
1400
1850
If the firm is a monopoly, what is marginal revenue when the quantity is 25?
MR=
What is the marginal cost when quantity is 15?
MC=
If this firm is a monopoly, at what quantity will marginal profit be $0.00?
Quantity=
If this is a perfectly competitive market, which quantity will be produced?
Quantity=
Chapter 9 Solutions
Managerial Economics: A Problem Solving Approach
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Similar questions
- Comparing a perfectly competitive market to a monopoly, which of the following is true? Group of answer choices Price will be higher than marginal cost in the perfectly competitive market but will beequal to marginal cost in the monopoly. Price will be equal to marginal revenue in the perfectly competitive market but will behigher than marginal revenue in the monopoly. at that point on the market demand curve which intersects the marginal cost curve. Price will be higher and quantity will be lower in the perfectly competitive market than inthe monopoly.arrow_forwardplease refer to image provided On the left hand side, the market consists of many perfectly competitive firms. On the right hand side, this market is dominated by a single monopoly firm. How much is the consumer surplus under perfect competition?arrow_forwardCompare and contrast the decision-making processes of a competitive firm versus a monopoly firm. a. The difference between C and M markets in terms of the (homogeneity or uniqueness of product, barriers to enter and number of firms). b. You must point to the difference in the demand curve for a C firm and that for a M firm. c You must refer to the long run profit (or not) of the C as well as M firm. d. You must point to whether C and M firms are efficient or NOT. Graphs are welcome, not manadatory.arrow_forward
- What is a monopoly and why does it differ from perfect competition? discuss an example of monopoly, its source of market power, and possible policy solutions to correct the negative consequences stemming from highly concentrated market power.arrow_forwardThese two cases provide examples of markets that are characterized neither as perfect competition nor monopoly. Instead, these firms are competing in market structures that lie between the extremes of monopoly and perfect competition. How do they behave? Why do they exist?arrow_forwardMonopoly outcome versus perfectly competitive outcome Consider the daily market for hot dogs in a small city. Suppose that this market is in long-run perfectly competitive equilibrium, with many hot dog stands in the city, each one selling the same kind of hot dogs. Therefore, each vendor is a price taker and possesses no market power. The following graph shows the demand (D) and supply curves (S = MC) in the market for hot dogs. Place the black point (plus symbol) on the graph to indicate the market price and quantity that will result from perfect competition. Use the green point (triangle symbol) to shade the area that represents consumers’ surplus, and use the purple point (diamond symbol) to shade the area that represents producers’ surplus. (graph 1) Assume that one of the hot dog vendors successfully lobbies the city council to obtain the exclusive right to sell hot dogs within the city limits. This firm buys up all the rest of the hot dog vendors in the city and…arrow_forward
- Assume a perfectly competitive market. Draw the average total cost, average variable cost,marginal cost, and marginal revenue curves for a good. Determine the profit-maximizing levelof output given that the price of the good is above the minimum average variable cost butbelow the minimum average total cost. Is the profit at the chosen price point positive,zero, 0r negative? Shade the area representing profit. Assume a monopoly market. Draw the average total cost, marginal cost, marginal revenue,and demand curves for a good. At what price will the monopolist sell? What is theprofit-maximizing level of output at this price? Shade the area representing profit.arrow_forwardPlease label your graphs axes correctly. Label all curves and shade properly Supply and Demand, show an elastic, inelastic, perfectly elastic, and perfectly inelastic Demand Price ceiling in effect and what it causes in terms of quantity and surplus or shortage, dead weight loss Perfectly Competitive firm showing profit, MC, ATC, Demand Perfectly Competitive firm in shutdown Side by side graphs, market and PC, showing the transition from losses to long-run Monopoly graph, show the following: Where demand is elastic where they maximize total revenue, Socially optimal price, productively efficient profit, Consumer surplus deadweight loss producer surplus 7. Factor Market- side by side graphs with a labor market 8. Monopolistic competition in the long-run 9. Economies of scale, diseconomies of scale 10.Trade graph, showing free trade and showing the tariff. Label and shade DWL Consumer/Producer surplus on both deadweight loss tax revenue 14. Negative externality in…arrow_forward3.1. Fill out the table below. Unit Marginal Marginal Quantity (Q) Price (P) Total Revenue (TR) Fixed Cost (FC) Variable Cost (VC) Total Cost (TC) Profit Cost Revenue 14 $10 $3 $43 15 $10 $51 16 $10 $60 17 $10 $70 18 $10 $81 3.2. Is the table above pertaining to a perfectly competitive firm or monopoly? How can you tell?arrow_forward
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