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- suppose that a monopolist increases production from 10 units to 11 units Interpret the result. The monopolist is facing inelastic demand. If a profit maximizing monopolist is producing such that marginal cost is 10 nbsp 11. For the quantities of inputs employed MPL 2 widgets and MPK 5 widgets. Suppose that at an output of 1 000 units a monopolist has marginal cost of 40 marginal revenue of 30 average variable cost of 30 and average total cost of 50. decrease production to increase demand for its product. quantity demanded of milk will be less than quantity supplied C. The deadweight loss that arises in monopoly stems from the fact that the profit maximizing monopoly firm produces a quantity of output that exceeds the socially efficient quantity. Suppose a firm 39 s total revenue is 100 when it sells 10 units and 110 when it sells 11 units. At 75 units what kind of profit positive profit loss or zero is this firm earning Is it possible for this firm to improve its profit level by adjusting production Why or Why not 11. The cost minimizing combination of labor and capital for a given level of output Q is L K Q a Q b . Suppose the marginal cost to produce this product is constant at 1 per unit. This increase in profit has two sources which are shown in Fig. 3 5. Answer Key D Question 16 of 19 5. If the market price declines from 30 per unit to 29 per unit. Christine is an artist who creates custom cookie jars. B MR 1 2 P for any unit. To simplify the following discussion we assume that the monopolist will only charge a Except for the first unit marginal revenue is always less than price. Answer Key D Question 16 of 20 4. 40 of producing 5 units of output so the firm continues nbsp 5 Jan 2008 3 What happens to a monopolist 39 s price profits and ouput if its fixed costs decrease A Price decrease Between 6 and 7 units the cost increases by 10 making it marginal cost equal to the price of 10 marginal revenue . In response the quantity demanded of A increase from 100 to 120 units. Total costs nbsp A monopolist might be pretty happy about its extraordinary profits but these come at a cost for society. If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is Choose one answer. Scroll through lower setup cost values and describe the Suppose that at 500 units of output a monopolist is producing such that marginal revenue is equal to marginal cost. typical. The firm earns an accounting profit of _____ and an economic profit of _____. The revenue received from the sale of this unit is less than the cost of producing this unit. The monopolist s profits are reduced to zero and the consumer surplus increases by 72. S. decrease by 8 d. What is the dollar value of total revenue at 75 units _____ 12. Example Suppose the monopolist wishes to produce 6 units 3 units per plant gt MC 1 6 MC 2 3 Reducing plant 1 39 s units and increasing plant 2 39 s units raises profits Suppose a monopolist faces a demand curve which entails a monopoly output of q 200 2 75 50 units pp 10 28 2014 11 Production in the Elastic Region Subtracting total costs of 4 labor units times 10 plus 3 capital units times 20 100 yields a profit of 68. C 50 units. 0 c 1. If it were to increase production to 21 units which of the following must occur Quantity. D 189. 22. A price effect in order to sell the last unit the monopolist. 48. Suppose that my daily marginal benefit from drinking coffee increases by 2 per cup. 8 the short run increase in price caused by production under monopoly instead of perfect competition is approximately A 1. Suppose the monopolist is currently producing 2 units of output for which it is receiving a price of 10 per unit and a total revenue of 20 2 10 . C 19. In a zero production scenario the firm will have an operating loss equal to its fixed costs. pro t function revenue cost marginal unit as well as on each of the preceding units sold. In an actual economy with a tremendous number of firms and workers it is easy to see that the production possibilities curve will be smooth. If a firm increases output to Q1 it will have a low average cost of AC1 e. Monopoly Production. 2. profit per unit is the greatest. Consumers of type 1 have relatively low demand given by P L 5 q L and consumers of type 2 have relatively high de mand P H 10 q H where q Suppose if all the resources are engaged in the production of guns there will be a maximum number of guns that can be produced per year. If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is nbsp b 10. If the market price declines from 30 per unit to 29 units marginl revenue for the eleventh unit is a 1 b 9 c 19 d 29 e 11 Suppose that a monopolist increases production from 10 units to 11 units. Oct 25 2017 72. unit. The demand curve shows how the quantity of the good produced affects the price of the good. 34 35 Suppose the firm in Figure 10 3 experiences a parallel increase in the demand for its product. Suppose Mar 12 2020 10. If the market price declines from 30 per unit of labor. Suppose a monopolist can sell 40 units of output per day for a price of 5 each and 41 units of. Its marginal revenue is 8 its marginal cost is 7 and rising its average total cost is 10 and its average variable cost is 9. However at some point labor units increase output at a decreasing rate implying per Suppose a firm has a fixed sum Co to spend on labor and capital available at per unit 11. This is measured by 1. A the cost of producing extra units of output increases as production is increased . Marginal cost falls over the range of Illustrating Monopoly Profits. When priced at 300 pesos each a toy has an annual sales of 4000 units. produce 10 units firms will exit the market in the long run. Suppose a new firm with the same LRAC curve as the incumbent tries to break into the market by selling 4 000 units of output. 50 c 4. Practice. Number of workers. If the market price declines from 30 per unit to 29 per unit marginal nbsp If a perfectly competitive firm increases production from 10 units to 11 units and Suppose that a monopoly computer chip maker increases production from 10 11 1 19 1 19. 33 Assume that by a uniform pricing system the monopolist would sell five units at a price of 10 per unit. If a natural monopoly producing 10 000 units of a good is broken into 10 identical cost method of production known only to the monopolist and increasing nbsp 29 Apr 2018 Suppose that a monopolist increases production from 10 units to 11 units. What is the marginal revenue from the sale of the third unit a. 80 . 50 b 9. 29. If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is 19. At x 1 0 the TP is 0 at x 1 1 TP is 10 units of output at x 1 If a monopolist produces 100 units of output at a market price of 5 per unit with marginal revenue per unit equaling 4 we would expect that if the monopolist 39 s good was provided under pure competition quantity would be Question 1 of 20 5. should use more of both inputs in equal proportions. Which of the following statements is true for a monopolist at the profit maximizing output level A Price exceeds marginal revenue. paying a different price for each unit then the TR of the monopolist would be equal to EMU TU that the consumer derives from consumption of this quantity and consequently his Title Micro 1. b 26 125. If a producer sells 10 units of a product at price Rs. 23 if the consumer buys the quantity q q 0 of the good paying p p 2 for the q 2 th unit p p 1 for the q 1 th unit and so on i. If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is Question 27 options 1. 9. When output decreases from 5000 units to 4000 units then LRAC go up by 0. 180. Suppose that the firm has 0 units of L and 10 units of K and is able to produce a positive level 14 Suppose a monopoly produces tables and can sell 10 tables per month at a price of 400 per table. 50 e. Firstly even at the output of the pure monopoly q m price discrimination fetches a higher profit on the intra marginal units. 5 . At the other extreme suppose all the resources are employed in production of butter only. Answer for 13 When you go to the movies the theater is a monopoly vendor of popcorn while you 39 re there which is why it costs so much . C Q2. Suppose the firm is currently producing Q f units. The firm is selling its output at 6 per unit and average total cost at 500 units of output is 5. ANSWER T 12. Kubin company 39 s relevant range of production is 18 000 to 22 000 units. If a specific tac of t 10 per unit of output sold is imposed upon sellers Suppose that a 10 increase in the price of good X causes a 20 increase in the the first 10 units of the good for 6 each and all additional units i. unregulated monopolies. B 10. production 500 000 more tons would lower price by 10 from 50 to 45 Consider individual tomato farm Produces 1 000 tons per year Consider individual tomato farm Produces 1 000 tons per year 10 increase in one farm s production is 100 tons Less than 3 000 units Suppose that a firm produces 200 000 units a year and sells them all for 10 each. The red shaded region in Figure 8. On the basis of this information we a. 45 Points The demand curve facing a monopolist is Correct D. 25. Order ing LESS increases costs by 4. 5 24. 3 . If marginal 10. If the monopolist is producing 5 units her marginal cost is 20 while her marginal revenue is 10. The monopolist is facing unit elastic demand. An increase in supply with no change in demand will lead to ______ _ in If a perfectly competitive firm sells 300 units of output at a market price of 1 per unit revenue it is assuming that the demand for tickets is If a monopolist sells 100 units for 10 each unit and has an average cost of 8 per unit . Which of the following should the firm do to increase profit Oct 16 2019 D The output will always be less than that produced by a single price monopolist. ANSWER F 13. 50 on each for a Return to Figure 9. B it is making a loss. Table 14 10. However the size of monopoly profits can also be illustrated graphically with Figure 9. 0 Points Most electric gas and water companies are examples of If a perfectly competitive firm increases production from 10 units to 11 units and the market price is 20 per unit total revenue for 10 units is The demand curve facing a monopolist is Suppose that a monopolist increases production from 10 units to 11 units. The government is seeking ways to collect tax revenue from the monopolist and faces two proposals i. Example 11. Question 17 of 19. What area of the graph represents total surplus Calculate the dollar 11. If MC was the firm s original marginal cost its optimal production decision is now given by Chapter 10 Market Power Monopoly and Monopsony. If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is 19 Suppose that a monopolist increases production from 10 units to 11 units. if the market price declines from 30 to 29 per unit marginal revenue for the 11th unit is 19 the demand curve for a monopoly is The demand curve facing a monopolist is 16. Jun 13 2020 Suppose a monopolist sells one version of its output to consumers and another version to businesses. Therefore the set of consumers and the monopolist each pays 7 cents of the tax. Now in the Table 3. In order to increase sales by one table per month the monopolist must lower the price of its tables by 20 to 380. 1 unit. A monopolist serves a market in which the demand is P 120 2Q. A firm has two factories for which costs are given by Factory 1 C 1 Q 7. Its marginal cost is 10 for the first 15 units MC 10 when 0 Q 15 . The cost associated with increasing output by one unit is equal to P Q 0 since the price decreases P for all units sold area A . A firm that expanded its scale of operation to achieve an average total cost curve such as ATC 2 could produce 240 units of output at a lower cost than could the smaller firms producing 20 If a monopolist produces and 2000 units charging a price of 36 per unit and incurring average total cost of 5 per sit the monopolist will earn profit equal to 1 6 000. B 10. 220 If a perfectly competitive firm sells 10 units of output at a price of 30 per unit its marginal revenue is Answer Key D Question 16 of 20 Suppose that a monopolist increases production from 10 units to 11 units. Economics For a monopolist allocating outputs in two different geographical markets Price 1 P1 15 Q1 P2 25 2Q2 TC 5 3 Q1 Q2 . D 99. If these two In contrast to perfect competition a monopolist charges a a. 1 The revenue schedule of a monopolist . 1 Point A. maintain its current level of production to maximize profit. c What is the relationship between the price elasticities and the prices charged in each market Problem 3. This yields Figure 9. In this situation the firm A is producing the maximum output possible given the prices and relative productivities of the inputs. Fixed costs are spread over more units as output increases so average cost per unit xed variable cost per unit declines as output increases. This is a movement along the demand curve to a new quantity demanded. 1. B. Suppose that a monopolist increases production from 10 units to 11 units. 4. Aug 30 2013 The monopolist will produce at the social optimum quantity of 29 units. If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is 17. One way in which monopolistic competition differs from oligopoly is. 00 2. 3. b Suppose fixed costs for this airline increase. b Underutilisation of resources. IF the market price declines from 20 per ni to 19 per unit marginal revenue for the eleventh unit is A 1 If a perfectly competitive firm increases production from 10 units to 11 units and the market price is 20 per unit total revenue for 11 units is D. Estimate from the graph what the new firm s average cost of producing output would be. 2 Now suppose this monopolist decides to practice second degree price discrimination. The profit maximizing choice for the monopoly will be to produce at the quantity where marginal revenue is equal to marginal cost that is MR MC. 0 0 3 1 7 5 2 14 9 3 21 So for a reduction in the level of output of 8000 5000 3000 units the LRAC goes up by 11 10 1. It Can Produce Two Goods Clothing C And Wheat W . Firm Decisions II a monopolist faces the inverse market demand curve p y . 20. 11 Figure 11. 00 direct labor 4. Economics I 21 Firm A is a monopoly. Suppose a production function is given by Q min L K . Oct 13 2020 Question Question 1 11 Points 1 Suppose Home Has 2 000 Units Of Labor Available. If the monopolist produces an integer number of units the profit maximizing production level is 7 units price is 4 revenue is 28 total cost is 23. 5 x2. Now suppose that the price of the product increases to 10 and if this firm is typical of other firms in the industry then. B It will move from a zero profit situation to a profit situation. Find the monopolist s profit maximizing output and price. Monopolistically competitive firms have higher unit costs than would occur in a perfectly competitive market. Similarly suppose the monopolist sells units 21 30 at a price of 70 31 40 at a price of 60 41 50 at a price of 50 etc. Suppose that in a monopoly market the total cost per week of producing a high tech product is given Suppose that a pure monopolist can sell 10 units of output at 10 per unit and 11 units at 9. There are two inputs to the firm s production process K and L. When selling the 50 th game the firm will always receive a. May 29 2019 Suppose that a monopolist increases production from 10 units to 11 units. The truck is a The firm 39 s marginal revenue is the change in total revenue from the sale of one more unit of their output. the monopolist should lower its price to 6 for all consumers. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost 6. 2 its demand fell by 10 units per day. What happens if it increases its output to Q g units 2 A Its average cost of production will fall and its profit will rise. Answer to Suppose that a monopolist increases production from 10 units to 11 units. 1i is a measure of the loss to society from having monopoly rather than competition. The firm therefore is a n A pure monopolist. 10 Refer to Table 9 1. DWLm 1 2 55 per unit 10 per unit 90 units 45 units 1012. A firm is employing 100 units of labor and 50 units of capital to produce 200 widgets. 1 we see that MR is always less than AR P except for the first unit when TR is the same as the increase in revenue between zero output and one unit of output. Is B a substitute or complement for A Why Since the monopolist is unwilling lower its price to increase output and lose revenue from its pre existing sales the deadweight loss persists. 3 000 units at which MC 10 and MB 13 b. 00 variable d Continue to produce the same number of units as before the increase in price. Price must fall to 2. 10 units b. The seventh unit thus has a marginal cost of 20 TC Q 20 1 20 . A monopolist produces 14 000 units of output and charges 14 per unit. Suppose you are interested in maximizing output given a budget constraint of 500. 50. The marginal cost of production is constant and equal to 10 and there are no f Each additional unit a monopolist sells will push down the overall market price and as it sells more units this lower price applies to increasingly more units. 00 Suppose that a monopolist increases production from 10 units to 11 units. Apr 23 2014 11 units is Suppose a perfect competitive firm increases production from 10 units to 11 units. 4000. If the quantity of blankets demanded increases from 4600 to 5700 in response to a decrease in their price from Rs. Indicate the profit as an area on your diagram. is the market demand curve Let 39 s suppose that this firm lowers price to 9 and 51 units are sold. If we assume increasing marginal costs and exogenous input prices the optimal decision for all firms is to equate the marginal cost and marginal revenue of production. Total product. 10. C The firm will not sell any output. If the marginal revenue of the seventh unit is 5 then 7 7 9. The market is in equilibrium. 0 Points Suppose that a monopolist increases production from 10 units to 11 units. 12. Total revenue is now 40. To sell another unit it must reduce price to 9. The Case in Point on hockey teams suggested that the market behavior of hockey teams can best be analyzed using the model of A at any price the greater the quantity sold the greater is a firm 39 s total revenue If a perfectly competitive firm increases production from 10 units to 11 units and the market price is 20 per unit total revenue for 11 units is 220 higher and output is smaller. 2 Refer to Figure 13 17. Economics I output at a price of 90 and the second 10 units at a price of 80. Example Suppose the monopolist is selling 3 units at a price 12 per unit. 27. How do the price and output of a monopolist differ from those in the perfectly. If the elasticity of demand for the product is 2 find the marginal cost of the last unit produced. The marginal revenue of the 11th unit of output is a . 9 10 In Figure 13. decline and product diversity in the market increases. higher 11. If the government subsidizes ethanol production and the demand for corn permanently rises in the SHORT RUN we should expect to see A the price of corn rise existing farmers increase production and positive 10. 0 vats of juice. The demand curve for boom boxes is P 25 0. its production technology. The explicit costs of production are 1 500 000 and the implicit costs of production are 300 000. From above the inverse demand curve is given by P 500 10Q and the costs are given by C Q 10Q2 100Q. It is straightforward to calculate profits of given numbers for total revenue and total cost. The monopoly maximizes profit by selling . 5. 160 c. 00 per unit. 23. Show deadweight loss. One more unit of L could increase output by 200 units whereas one more unit of K could raise output by 150 units. 69 b 1. recall that the equilibrium price in the absence of the tax is 90 cents . increase by 5 b. A monopoly producer of a foreign language translation software package faces the demand and cost structure given in Table 9 1. perfect complements. 73. 50 find the marginal cost of the last unit produced. Which of the nbsp input cost per unit w1 w2 How can this firm Suppose input 2 is fixed at x2 x2 y f x1 x2 . E Total costs will be lower than that of a single price monopolist. Therefore A. Figure 10 2a shows the two terms for an increase in output from 20 units to 21 units and shows marginal revenue as a function of quantity over a range of output. 22 If a firm sells 5 units of output at 10 per unit and 6 units of output when price is reduced to 9 its marginal revenue from selling the sixth unit is 22 _____ A 4. Production of this unit will cause profits to fall by 10 20 10 . Then the derivative C 39 x is the marginal cost at production of x units and the increase of cost when production increases from x 1 units to x 2 units is Note that for example the cost of increasing production from 1 000 units to 1 001 units may be different from the cost of This time the slopes of the total cost curve are shown these slopes equal the marginal cost of each additional unit of output. c 28 500. So his total revenue is 100 dollars. 1. We know that monopolists maximize profits by producing at the quantity Q where marginal cost marginal revenue. For example increasing output from 6 to 7 units Q 1 increases total cost from 480 to 500 TC 20 . This indicates the marginal revenue of the 11th unit is 3 Table 11. 9. Draw the firm 39 s MC AVC and AC curves. The firm is using the costminimizing combination of capital and labor. At 10 sales equal 50 units. The deadweight loss from a constant marginal cost monopoly refers to Assume they have two types of passengers high demand and low demand . 67 and profit is. Draw a graph of the demand curve for labor when the firm wants to produce 10 units of output Q 10 . If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is A. A monopolist 39 s marginal expenditure is A. Now the market surplus increased. A monopoly has a constant marginal cost of production of 1 per unit and a fixed cost of 10. The plot itself is a fixed factor in the production of vegetables. C 20 units of labor at a wage of 50. Under these demand and cost conditions the firm maximizes profits by producing Oct 16 2019 d. what is the marginal curve and between the quantities 5. Cody is willing to pay 6 for the monopolist 39 s output. The monopolist s pricing rule as a function of the elasticity of demand is P Ed P MC 1 or alternatively MC E P d Scenario When a monopolist charges 10 for its product it sells 500 units of the product. increase by 2 c. Which of the following is true a. Suppose further that the weekly demand function for this product is p 500 2x. Use the following to answer questions 62 63 Answer the question s below on the basis of the following demand and cost data for a pure 27 Suppose that the corn industry is perfectly competitive and in a long run equilibrium. The monopolist then plans to offer an additional 10 more units at a second pricing level and an additional 4 more units at a third and lower pricing level. Having decided to sell four the monopolist had to lower the price of the first three from 5. 00 15 16 0. 30. Based on this information if the monopolist increases production by one unit its profits will a. 2 000. b. Total revenue is 36. The gap between the two curves measures the degree of monopoly. The marginal revenue of the 21st unit is A 11. 1 4 Q 1000 c Suppose that Gargantuan is a competitor in the nal goods market and can sell as many units as it wishes at a price of 10. Jul 24 2006 An increase in demand holding the elasticity constant corresponds to an increase in the parameter a Suppose we increase a by a fixed percentage replacing a by a 1 . If the monopolist practiced price discrimination he would sell the first unit for 50 the second unit for 40 and so on. 90 8 8 11. Variable cost. If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is A 1. 2 Oligopoly middot 11 Monopoly and Antitrust Policy Suppose that due to a successful advertising campaign a monopolistic competitor experiences an increase in That is one opportunity cost of the variety of products we have is that each product costs more per unit than if there What is the profit maximizing level of output for the treatments and how much will the firm earn in profits Determine when a firm should continue producing in the short run or at which point it should shutdown In all three cases when the rental contract expires in the long run assuming revenues do not improve the firm should In scenario 1 the center does not have any revenues so hiring yoga teachers would increase variable costs and 10 2. C monopolistic competitor. TABLE 10 12. 5L2 Suppose that output can be sold for 10 per unit. Draw the average and marginal revenue curves and the average and marginal cost curves. The benefits that accrue to a monopoly firm 39 s owners are equal to the costs that are incurred by consumers of that firm 39 s product. He picked up 4 in revenue. 5 days ago Marginal revenue disregards the previous average price of 10 as it only Beyond that point the cost of producing an additional unit will For example 10 units sell at 9 each resulting in total revenues of 90 11 units sell at For a monopolist the marginal benefit of selling an additional unit is less nbsp 15 Feb 2013 for incorrect answers. as P 11 Q we know that the marginal revenue function is MR 11 2Q. Which of the following is true The monopolist is facing elastic demand. b 10. 0 Points The difference As drawn the monopolist has a constant marginal cost up to its production capacity denoted by K. A pure monopoly has the same economic goal of perfectly competitive companies to maximize profit. 67. 00 fixed selling expense 3. Most electric gas and water companies are examples of Question 28 options The monopolist must reduce the price of all units of output not just an additional unit in order to increase sales. c. In this price range the demand for good X is A inelastic B elastic C unit elastic D perfectly inelastic E perfectly elastic Oct 16 2019 D The output will always be less than that produced by a single price monopolist. Suppose that a monopolist must choose between two points on its demand curve it can sell 100 units for 3 each or it can sell 160 units for 2 each. To sell quantity Q 3 it would have to reduce the price to P 3. ____ 11. But we see that the monopolists ATC MC is 20 dollars a unit. Total pro t for Billy s Bean Bag Emporium would be a 3 875. 5 points Now suppose that 1 2 and 1 2 Suppose factor 2 is fixed at 4 units. costs increase incrementally in an undetermined pattern. 80 9. The monopolist has a constant average cost of 6 per unit. C 21. 8. 15 units ____ 32. 1 we look at the column where factor 2 takes the value 4. With this high fixed capital cost the more you produce the lower the average cost per unit of steel. Suppose that a firm in a competitive market faces the following revenues and costs QuantityTotal RevenueTotal Cost. Her annual revenue from selling point A and produces 75 million units of civilian goods and 2 million units of military goods. 23 The demand curve facing a monopolist will be more elastic 23 _____ A as the consumers 39 need for the good increases. The firm s production function is as follows Days of Labor Units of Output 0 0 1 7 2 13 3 19 4 25 5 28 6 29 7 29 c. The marginal revenue curve for a monopolist is flat downward sloping upward sloping are available. can say that the firm should close down in the short run When the monopolist produces 10 units the price he receives for each unit is 10. Consider a 10 percent increase in price so the price increases to 11. There is excess demand a shortage of 10 units. Refer to the above table. 0. decrease by 5 marginal unit as well as on each of the preceding units sold. 50 9 9 14. D Q3. B 204. b Marginal revenue will be greater than the price the monopolist charges per unit. At what output will the monopolist maximize its total revenue A 5. Ordering more increases costs by 2. Note that questions 17 24 concern chapter 11 questions 25 32 deal with chapter 12 and questions 33 40 deal with chapter 13. 20. Suppose a monopolist can sell an extra unit of its good at a price of 50 and the MR of that unit is 10. 50 had the monopolist been satisfied to sell only three. 1 000. The total revenue is calculated by multiplying the price by the quantity produced. The marginal revenue of producing 101 units per day is 10. Example 3 Given the revenue function in dollars R x 3x3 600x2 and the cost function in dollars C x 357x2 1800x nd a the marginal pro t at x 10 units. If the elasticity of demand for the product is 2. 9 What is the Apr 17 2015 Suppose marginal cost is constant at 8 per unit. The price increase effect D. The average variable cost of producing the first unit of The monopolist will choose to produce 3 units of output because the marginal revenue that it receives from the third unit of output 4 is equal to the marginal cost of producing the third unit of output 4. B Marginal cost nbsp Suppose that the monopolist faces the following inverse demand function P Q 0 39 amp amp Q. Compute the . How much revenue is gained at the margin If the monopolist 39 s marginal revenue is greater than its marginal cost the monopolist can increase profit by selling fewer units at a higher price per unit. 17 5. Jan 06 2018 When the firm increased the price to 10. Which of the following should the firm do to increase profit Mar 08 2018 Imagine the steel industry. 40. If the monopoly If a perfectly competitive firm increases production from 10 units to 11 units and Aug 25 2020 For example if the price of a good is 10 and a monopolist sells 100 units of a product per day its total revenue is 1 000. MC is the lowest possible. Oct 17 2020 Below is budgeted production and sales information for Flushing Company for the month of December Product XXX Product ZZZ Estimated beginning inventory 30 000 units 18 000 units Desired ending inventory 34 000 units 17 000 units . dollars . Mar 31 2014 D 38. For a natural monopoly average cost declines as the number of units produced increases over the relevant output range. 55 costs of production. C it should cut back its output to maximize profit. A 0 units. 00. If this market is served by two duopolists who choose their production levels independently acting in their own self interest what is the Nash equilibrium production level for each firm a. So the marginal revenue will be negative and no firm will produce an extra unit if it means The marginal cost curve for a monopoly is NOT Plug QM 10 into demand equation we have P M 10 40 30 f Suppose this market was a perfectly competitive market i. Use the following to answer questions 62 63 Answer the question s below on the basis of the following demand and cost data for a pure C. 6 Sep 2020 10. 50 Suppose that a monopolist must choose between two points on its demand curve it can sell 100 units for 3 each or it can sell 160 units for 2 each. Add a downward sloping demand curve and show the profit maximizing quantity and price. Andreas Bentz page 11. This reduction of price reduces the revenue on the units it was already selling. how should it a. Explain why price discrimination and the existence of slightly Now let 39 s suppose that one day the state decided that maybe a monopoly isn 39 t so bad thing if it 39 s properly regulated. 45 Points Suppose that a monopolist increases production from 10 units to 11 units. The monopoly firm may choose its price and output but it is restricted to For the next question consider a monopolist. d 30 000. D 20. TC 400 4 29 516 TR 4 29 116 Profit 400 Government subsidy will be required to keep this firm in business. The price that the monopolist can expect to receive falls to 8 per unit. An industry is characterized by having average total cost that decreases as output increases. Most electric gas and water companies are examples of A. 6 which takes the marginal cost and marginal revenue curves from the previous exhibit and adds an average cost curve and the monopolist s perceived demand curve. 50 to 5. D 4. Impose an ad valorem tax of a on the monopolist. The monopolistes Recall that MR is just the increase in TR from one unit to the next which is how we found MC in chapter 7 except we Thus the average total cost of producing 6 units is quot . 0IHJ. The price of corn is 3 per bushel. Marginal revenue is 0 and since marginal costs must always be positive the monopolist would not increase her output from 4 to 5. increase production to maximize profit. A monopolist faces the demand curve P 11 Q where P is measured in dollars per unit and Q in thousands of units. The MC for the provision of the good is 5. The shaded vertical rectangle is the gain from selling the additional unit the colored horizontal rectangle is the loss from selling the other units at a lower price. The last unit of capital added 50 units of output while the last unit of labor added 10 units of output. D. Four units sell for 5. 3 Answers to If a perfectly competitive firm increases production from 10 units to 11 units and the market price is 20 per unit total revenue for 11 units is a. Total revenue. Apr 11 2018 Microeconomics Final Study Guide Week Nine Chaing Chapter Nine Monopolies Characteristics of monopolies Just one seller No close substitutes for produce services Significant barriers to entry Price makers have market power MR lt P because the industry s demand is the monopolist s demand Profit is maximized by producing where MR MC and price is set based Consider the following short run production function where L variable input Q output Q 10L 0. where Q is weekly production and P is price measured in cents per unit. 220 to Rs. 80 In this example the price of 28 is greater than the AVC 16. 25 per unit. If a perfectly competitive firm increases production from 10 units to 11 units and the market price is 20 per unit total revenue for 10 units is 200 A monopoly is a market characterized by Suppose that a monopolist increases production from 10 units to 11 units. In this case P M 400 USD unit and Q M 10 units see above . For a pro t maximizing monopolist facing a downward sloping linear demand curve at any positive quantity of output a Marginal revenue will be equal to the price the monopolist charges per unit. 10 Figure 11. Remember the monopolist can choose the quantity produced or the price but not both. 5 10 11. An increase in production by a monopolist has two opposing effects on revenue A quantity effect one more unit is sold increasing total revenue by the price at which the unit is sold. A monopolist is currently This production possibilities curve includes 10 linear segments and is almost a smooth curve. 10. B 9. As a result the firm gained profit of 288 causing reduction of 12 in initial profit. 46 d 2. Principle 2 It is profitable for the firm to increase the output whenever the marginal revenue is greater than the marginal cost. Firm A hires only unionized labor. Furthermore suppose that all the firms in this industry are identical and that a representative firm s total cost is TC 100 5q q2 Apr 15 2020 10 units will be produced as that is where the MR MC when a firm price discriminates it charges the highest price for each unit sold therefore the MR becomes the Demand Curve The shaded in portion shows the Price Discriminating monopolists profits Aug 20 2019 In the given figure the movement on the production possibility curve from point A to point B shows Choose the correct alternative 1 a Growth of all the resources in the economy. 50 d 2. Suppose to sell 4 units the monopolist must lower his price to 10 per unit. i Find the profit maximizing output and price and calculate the monopolist s profits. If the market price declines from 30 per unit to 29 units marginl revenue for the nbsp Suppose a monopolist increases production from 10 units to 11 units. For a monopoly like HealthPill marginal revenue decreases as it sells additional units of output. the available milk supply will have to be rationed Question 2 of 20 5. 75. When a monopolist increases the number of units it sells there are two effects on revenue. 154 from the sale of 11 units of the good. For a firm with monopoly power that cannot engage in price discrimination 2 the marginal revenue curve lies below the demand curve because any D approximately 2 units per day. It has a fixed cost of 300. A. 13 Now suppose that the monopolist in the previous question is a price discriminator and the purchasers of the first 4 units are unaware of the price cut necessary to sell the additional unit. If a perfectly competitive firm increases production from 10 units to 11 units and the market price is 20 per unit total revenue for 10 units is Quiz 5 A monopoly is a market characterized by a single seller Because monopoly firms are price setters they can sell more only by lowering price Suppose a monopoly can separate its customers into two groups. 50 resulting in total revenues of 93. If resale is impossible one can infer that B The firm 39 s revenue will increase. 2 units. Suppose a firm has a monopoly on the sale of a computer game and faces a downward sloping demand curve. equal the firm can increase profits by reallocating production towards the lower marginal cost plant and away from the higher marginal cost plant. The monopolist plans to sell 18 units of output at a price of 11per unit. d Production of more units of Good Y and less unit of good X. Each additional unit a monopolist sells will push down the overall market price and as it sells more units this lower price applies to increasingly more units. Suppose that the price of product A falls from 20 to 15. 50 d. 11 Refer Nov 18 2013 0PDJ. Because the tax increases the price of each unit total revenue for the monopolist decreases by TQ and Ignoring any fixed costs total cost is 10Q or 56. g. B 20 units of labor at a wage of 40. 5 . 17. D it should increase its output to maximize profit. Mar 31 2012 Suppose that a monopolist increases production from 10 units to 11 units. 0. 50 or 2. all the way up to units 71 80 which are sold at a price of 20. The monopolist is facing an elastic demand. 220. In the market below what would be true at a price of 6 a. No Production function 1 does NOT have diminishing marginal returns to labor if 1 and 1. If the production adds more cost than revenue to the firm then it increases the loss of the firm. Most electric gas and water companies are examples of 18. the time to produce one additional unit decreases by a constant percentage. reduce fixed costs by lowering production. A Q h Q f units B Q j Q h units C Q h Q g units D Q j Q f units 19 Refer to Figure 13 17. MR MC. Suppose for example that a monopoly firm can sell quantity Q 1 units at a price P 1 in Panel b . In order to maximize profit or minimize loss in the short run the firm should Interpretation If production increases from 50 to 51 units the cost increases by 37500 dollars. A monopolist can sell 20 units of a product per day at a unit price of 10. 82 units at which MC MB A monopolist earning short run economic profit determines that at its present level of output marginal revenue is 23 and marginal cost is 30. c 20. B an increase in rent will cause an increase in the monopoly price and an increase in the monopolist s output C the monopolist s price will equal its marginal cost at the equilibrium output D the monopolist s marginal revenue will equal its average revenue at the equilibrium output E none of the above 8. E 11. 1 Economies of Scale Lead to Natural Monopoly . 3 or numerically 18. Figure 1 10 Refer to Figure 1. B Q4. Suppose the individual 39 s utility function is given by U I R 4IR2 A monopolist can produce quantities x and y of two products X and Y respectively If A costs R4 per unit and B costs R10 per unit and the consumer has R600 to spend what nbsp If a monopolist lowers its price and its demand is inelastic then its A total revenue increases. the number of firms in this industry will Suppose demand has elasticity of 1 Means 10 increase in U. Assume that a monopolist can sell 20 units for 12 each. 000. 52 and profit is 4. When a tax was if the most a consumer is willing to pay is 10 for a good and the consumer only pays 3 then the consumer has 7 in nbsp 29 Apr 2018 Suppose that a monopolist increases production from 10 units to 11 units. Consumers gain this deadweight loss plus the monopolist s profit of 48. h. The competitive solution is found where the demand curve intersects the marginal cost curve. Rather than setting the competitive quantity Qc and competitive price Pc at the point where price equals marginal cost the monopolist sets a higher price Pm and reduces its output to Qm the point where marginal revenue equals marginal cost. Production is such that Q L. If the monopolist is earning a positive economic profit it must 61. How will this additional unit of the good the monopolist has to cut the price on all other units. In this case the 12 Consider a monopoly with inverse demand function p 90 10y and cost function c y 10y. 00 sacrificing . If a monopolist is producing a quantity that generates MC gt MR then profit produce at the point at which price is equal to marginal cost of the last unit produced. c 15. Find the number of units that will give the break . If the market price declines from 20 to 19 per unit marginal revenue for the eleventh unit nbsp Answer Key D Question 16 of 20 Suppose that a monopolist increases production from 10 units to 11 units. Figure 10 4 provides a graphical representation of the answer to this question. If the market price declines from 30 per unit to 29 nbsp Answer Key D Question 16 of 19 5. If it wants to increase its output to Q 2 units and sell that quantity it must reduce its price to P 2. As we move down along the column we get the output values for different values of factor 1. 50 sales commissions 1. Isoquants. D 98. MR lt MC it would be adding more to its costs than it could gain in revenue for each unit produced beyond the MR MC point. Suppose a monopolist charges a uniform price of 10 based on profit maximization and has constant marginal costs of 3. b Write an expression for the marginal cost of producing an extra unit of output per day. 75 per unit. The monopolist will earn 12 in profits from producing 3 units of output the maximum possible. 11. The demand for its output is p 90 Q. 50 b. 66 41. B the monopolist can always increase its profits by increasing the price of its output. 11 Refer to Figure 9 3. 190 the price elasticity of demand for blankets is a 0. Return to Figure 9. When it lowers the price to 6 it sells 1 400 units of the product. the cumulative time per unit declines by a constant percentage when production doubles. 29. Increase in Profit Compared to a pure monopoly first degree price discrimination increases the profit of the monopolist. 1 . D perfect competitor. If the benefits outweigh the costs the monopolist should increase output if Q P 1 gt P Q 0 increase Suppose that in a monopoly market the total cost per week of producing a high tech product is given by C x 3600 100x 2x 2. Suppose a competitive firm and a monopolist are both charging 5 for their 11. workers . 00 P gained by selling the 16th unit Suppose a monopolist initially sells 15 units at a price of 2. 20 units d. Suppose a profit maximizing monopolist is producing 800 units of output and is charging a price of 40 per unit. B It will move from a zero profit situation to a loss situation. 25. Suppose a profit maximizing monopolist is producing 800 units of output and is charging a price of 45. 10 point A and then wants to increase sales by 1 unit. Diff 1. The manufacturer estimates that each 10 pesos increase per unit will decrease the sales by 100 units. In other words sales decrease by 5 units so the decrease in sales is 10 percent. 05K 2 The process per unit of L and K are 20 and 25 respectively. How many units or output per day should Gargantuan produce in order to maximize its pro ts 10 000 Say that you have a small plot of land for a vegetable garden 10 feet by 10 feet in size. 50 950 . 00 to sell the 16th unit point B . C It will move from a zero profit situation to a profit situation. 2. Suppose P0 is 10 and P1 is 11. a. Jun 04 2019 A pure monopolist is selling 6 units at a price of 12. 10 2. If he now increases his sales of the product by one unit and sells 11 units suppose the price falls to Rs. C 9. Given an output price of 3 per unit labor cost of 20 per unit and capital cost of 30 per unit determine the profit maximizing combination of resources and the respective output level and profit. The marginal revenue of the 11th table is A. should use less of labor and more of capital for cost minimization. D 38. IPDH. 17 or 4. The monopoly firm may choose its price and output but it is restricted to Effect of Excise Tax on Monopolist Figure 10. Suppose it costs 10 million to build a steel factory. If the firm is producing 700 units A it is making a profit. Marginal revenue on the 21 unit is a. The monopoly cannot increase quantity without causing the price to fall for all units sold. C. Correct Answer Key C Question 17 of 20 Most electric gas and water companies are examples of Correct Suppose that a monopolist increases production from 10 units to 11 units. Is the firm employing the optimal input c Suppose that Theresa 39 s income elasticity for bagels is 0. We can confirm this by calculating the elasticity of demand at 10. An unregulated monopolist could sell the first unit of output for 40. e. The monopolist will select the profit maximizing level of output where MR MC and then charge the price for that quantity of output as determined by the market demand curve. D . However for each additional unit sold the monopolist is forced to reduce the price by 2. 27 Suppose a single price monopolist is currently producing 100 units of output and is faced with the following P 20 MR 10 MC 15 ATC 18. Assume this monopolist 39 s marginal cost is constant at 11. The average fixed cost for producing 3 units of output is A 3. Suppose a pure monopolist is faced with the demand schedule shown below and the same cost data as the competitive producer discussed in question 4 at the end of Chapter 9 . What happens if it increases its output to Q g units 19 A Its average cost of production will fall and its profit will rise. At the monopolist 39 s profit maximizing level of output price will exceed marginal revenue. 8 the short run redistribution from consumer to the producer caused by production point A and produces 75 million units of civilian goods and 2 million units of military goods. 10 pts Suppose the supply curve of boom box rentals on Golden State Park is given by P 10 0. 00 and P L Rs 10. this maximum price for milk will have no economic impact B. Thus total industry revenue increases in the perfectly competitive market after the increase in marginal cost. This occurs if price is less than average variable cost. If the country decides to increase its military provision to 3 million units it must give up only 5 million units in civilian goods because certain factories are easily converted from civilian production to military production. B 8. 10 loss to all quot previous quot customers 2. Suppose a monopoly firm faces a downward sloping demand curve described by the equation P 100 2Q. S4. Total cost. 10. If the market price declines from 20 per unit to 19 per unit marginal revenue for the eleventh unit is A 1. The socially efficient level of production is 12 units. Labor costs 10 per unit and capital 5 per unit. 67 . Then price goes up by the multiplicative factor 11 and the change in price as a proportion of the price is 1 1 1 p p Similarly quantity rises by 1 1 q q. The marginal cost of producing the sixth unit of output is A 10. As we include more and more production units the curve will become smoother and smoother. Consider a profit maximizing monopoly pricing under the following conditions. 4 units. Suppose that a monopoly computer chip maker increases production from 10 nbsp Suppose a firm is collecting 100 in total revenues when it sells 10 units and it receives 110 in 10. Figure 11. In the short run the profit maximizing monopolist will Answer to Suppose that a monopolist faces a demand curve given by P 100 2Q and cost function given by C 500 10Q 0. jpg quot gt Figure 9 3 shows the demand and cost curves for a monopolist. When a monopolist produces where price equals the minimum of average total cost it earns a positive economic profit. 5 Suppose a specific tax of t dollars per unit is levied so that the monopolist must remit t dollars to the government for every unit it sells. E amount of the firm 39 s loss resulting from producing Q1 units of output. 00 36. 19. 200. 14 per unit. C 2. A firm 39 s revenue is determined by. Hence for per 1000 units of reduction in output the long run cost will go up by 1 3 0. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 C The monopolist should increase production and reduce price. The extra benefit from hiring or purchasing the marginal unit of an input per marginal unit B. Let it be 15 units one unit may be taken as equal to 1000 or one lakh and so on . The new demand in market is 85 units per day and the new profit is 340. 67 and 11. 2 Q. Suppose if all the resources are engaged in the production of guns there will be a maximum amount of guns that can be produced per year. D 75 units. 61. Oct 17 2020 For example suppose the price of a product is 10 and a company produces 20 units per day. 6. 7. 1. B 40. the firms in this industry should shut down in the short run. For example in Fig. A monopolist faces the demand curve P 11 Q where P is measured in dollars per unit and Q in thousands of units. Suppose that a pure monopolist can sell 20 units of output at 10 per unit and 21 units at 9. What happens to the EOQ and total cost when demand is doubled When carrying cost is doubled The EOQ rises by 82 units 41 and the total cost rises by 41 41 in EITHER case. 15 per unit he will get Rs. 2 Answers to Suppose that a monopolist increases production from 10 units to 11 units. The following information is given for a firm which is producing a single output X by using two inputs capital K and labour L . The marginal cost to the union is 10 per unit of labor. C 4. Since the MP L is always constant for a xed level of capital we never reach a point where an additional unit of labor will increase total output by less than the previous unit of labor. d. 1 shows the demand and cost curves facing a monopolist. Refer to Table 17 7. At 11 sales equal 45 units. The marginal revenue of the twenty first unit of output is A 9. So the state let the firms increase their exploitation of economies of scale and soon only one firm was left. For each of the following situations involving marginal cost MC and marginal benefit MB indicate whether it would be best to produce more fewer or the current number of units. There is a shortage of two units since the quantity demanded at the price of 4 is 9 units. d Suppose that we increase all inputs by 10 what will happen to output wage rate equal to 15 per hour and a cost of capital equal to 1 920 per unit. Provide a graph of this single price monopolist indicating CSm PSm DWLm the profit maximizing quantity and the profit maximizing price. 99 If a monopolist is practicing perfect price discrimination then the following equation is true A MR P for all units. With MC 20 total industry revenue is 20 47. 11 units at which MC 4 and MB 3 c. In this case it is the inelastic short run supply curve for oil that accounts for the big increase in price and only a modest increase in world oil consumption. B and C 10. c Production of more units of Good X and less units of Good Y. In order to maximize profits the firm should cut back on output. 5. Effect of Excise Tax on Monopolist Figure 10. Furthermore suppose that the minimum point of the AVC curve occurs at 10. The production function Q min L K indicates that the inputs are perfect complements. If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is Answer Key C Question 17 of 19 5. Calculate the arc cross elasticity between Product B and Product A. pricing. units it produced. C 25. the monopolist should ignore Cody 39 s want it is already profit maximizing. the 11th 12th etc. A 20 units of labor at a wage of 10. 00 variable manufacturing overhead 1. Suppose there is a perfectly competitive industry with a market demand curve that can be expressed as P 100 1 10 Q where P is the market price and Q is the market quantity. 11. Assume that his marginal cost is 5 per unit. 10 11 In Figure 13. The monopolist s producer surplus is equal to the shaded region. Suppose you are able to hold constant all other factors water sunshine temperature fertilizer and seed and vary the amount of labor devoted to the garden. We can still Does the marginal product increase or decrease as the 1. Because monopoly firms do not have to compete with other firms the outcome in a market with a b. Question 28 1 point Question 28 Unsaved. Note that if the price were to return to 60 the quantity demanded would also return to the 40 units. 19. If the market price declines from 30 per nbsp 10. Suppose that labor is the only input used by a perfectly competitive firm that can hire workers for 50 per day. 1 Q where P is the daily rent per unit in dollars and Q is the number of units rented in hundreds per day. D The firm 39 s profits will increase. Save Question 14 1 point Question 14 Unsaved Scenario Small Town Monopolist A monopolist sells its good in a small town and finds that it can sell 100 units when the price is 15 and an additional 75 units when the price is 10. You. 1 The Monopolist 39 s Demand and Marginal Revenue Curves. downward sloping unlike the horizontal demand curve facing a perfectly competitive firm. could produce the same level of output at a Jan 14 1997 This increase in income moves the demand curve to the right as shown in Figure 11. C 540. 5Q 2. Economics Microeconomics When a single price monopolist maximizes profits price is greater than marginal cost. ANSWER c. there 11 . 5 Referring to Table 10 1 the marginal revenue 10 A profit maximizing monopolist sets price where the price elasticity of demand is 35 Suppose the firm in Figure 10 3 experiences a parallel increase in the demand nbsp D get increasing amounts of revenue for each unit of output they produce. The marginal cost of the consumer version is 5 per unit while the business version has marginal costs of 5. To practice effective price discrimination a monopolist must be able to prevent the resale of goods among groups of buyers. 30. What choice of production technology should the firm choose a. d 30. Refer to the above information to answer this question. The monopoly example shows the magnitude of the welfare changes. Calculate the missing total revenue and margina lrevenue amounts and determine the profit maximizing price and profit earning output for this monopolist. What are the TOTAL benefits to this individual if she consumes 10 units of the good a 5. 50 fixed administrative expense 2. 2 Explain how monopolists maximize profits and solve for the optimal monopolist 39 s solution from a Suppose the marginal cost of supping pumped concrete is fixed at c and the cost of the truck itself the fixed cost is F. 150 as the total revenue. 1. B oligopolist. when it produces and sells 20 000 units its average costs per unit are as follows average cost per unit direct materials 7. perfect substitutes. demand for milk will be greater than supply D. ii Now suppose the government imposes a per unit tax t 20. B 25 units. 72. B 3. 70. The firm would be indifferent between the three choices. If each boom box imposes 3 per day in noise costs on others by how When revenues are at their maximum marginal revenue is zero. less marginal revenue on the 50 th game than it received on the 49 th game. A major difference between a single price monopolist and a perfectly competitive firm is that A the monopolist can maximize profit by setting the price of the output with marginal cost. One of the major differences between a monopolist and a nbsp Learning Objective 15. E Q1. total revenue is increasing at an increasing rate as output increases. Assume that the price of good X decreases from 10 to 9 per unit and that the quantity demanded of good X increases from 25 to 30 units. Nov 28 2017 Suppose that a monopolist must choose between two points on its demand curve it can sell 100 units for 3 each or it can sell 140 units for 2 each. A monopolist will produce a greater level of output than a competitive industry. A monopolist that maximizes profit determines price and quantity where a. Suppose there are 12 firms each operating at the scale shown by ATC 1 average total cost in Figure 10. 3 units. Therefore the monopolist 39 s marginal revenue is 80 180 100 which is 10 less than As the monopolist increases production marginal revenue continually nbsp 10 Firms in monopolistic competition have demand curves that are 19 If one firm in a duopoly increases its production by one unit beyond the monopoly nbsp Interpretation If production increases from 10 to 11 units the profit increases by Suppose that fuel costs 60 cents a litre and find the value of x that leads to nbsp A firm is producing 20 units with an average total cost of 25 and marginal cost of 15. D 9. The demand curve facing a nondiscriminating monopolist. A monopoly is facing two groups of consumers. When the monopoly increases the production of its good by 1 unit then it must reduce the price for all the units it sells. To sell 21 units each must be st priced at 11. B____ 11. Business Math. The average cost of production for each unit of output produced was 100. 47. Suppose also that it can produce additional units of output at a constant marginal cost of 40 and that total fixed costs are 1000. Thus MR is less than the Price or average revenue . rev 06_26_2018 Multiple Choice 16. According to the marginal principle a monopolist should increase output if marginal cost exceeds marginal revenue. the time needed to produce the last unit declines by a constant percentage when production doubles. B 16. suppose that a monopolist increases production from 10 to 11 units. 0 Points. Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. Now consider what happens when the monopolist increases its output to 3 units. The profit maximizing price charged for goods produced is 12. Suppose that the cost of production of laptop computers shows initially a brief span of decreasing marginal Producing more tacks would increase total profits. Dartmouth College Department of Economics Economics 21 Summer 39 02. 120 d. He will therefore obtain total revenue of Rs. 50 fixed manufacturing overhead 5. natural monopolies. C 12. A profit maximizing firm in a monopolistically competitive market is characterized by which of the following a. Units of output. 50 on each for a Mar 08 2018 Imagine the steel industry. If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is a. D 29. Answer ii Second degree price discriminating monopolist Suppose the monopolist charges two different prices 80 and 55. If the market price declines from 30 per unit to 29 per unit marginal revenue for the eleventh unit is Question 27 options 19. A monopolist earning short run economic profit determines that at its present level of output marginal revenue is 23 and marginal cost is 30. Question Suppose that a monopoly computer chip maker increases production from 10 microchips to 11 microchips. 50 per unit. . decrease production to maximize profit. the number of firms will tend to decrease in the long run. The price for each of the 275 units sold was 95. 00Refer to the Suppose that a monopolist must choose between two points on its demand curve it can sell 100 units for 3 each or it can sell 140 units for 2 each. 13. 5 units c. Moreover P K Rs 25. Answer B . there is an absolute increase in producer surplus compared to a competitive market when considering the dead weight loss involved. C the monopolist s marginal revenue is less than price. 00 each but three of these four could have been sold for 5. In other words buyers are willing to pay more for additional units of output than the units cost to produce. What are the monopolist s profit maximizing price and quantity or or Q 7. The Unit Labor Requirement In Clothing Production Is 5 While In Wheat Production It Is 2. If a natural monopoly decreases the quantity of output it produces . The extra cost incurred to hire or purchase the marginal units of an input per marginal unit C. 0 Points If the government imposes a maximum price for milk that is above the equilibrium price _____ . 1 quot Economies of Scale Lead to Natural Monopoly quot . In the same way when the price is increased to 11 per unit there is once again decrease in demand. 82 units at which MC MB 10 10 10 100 11 200 5 000 22 MC MPL kl 6 Suppose that you have the following production function Q 5LK 1L2 . 2. Suppose the firm depicted in the table is selling a prescription drug for which it had a patent but the patent has expired. True. Definition An isoquant is the locus of all input combinations that yield the same level of output. This is the total product of factor 1 schedule with x 2 4. algebra. 43 277 units at which MC 99 and MB 99 d. 33. Topic Monopoly Profit Maximization. The quantity demanded for product B increases from 200 to 300 units. From Table 11. Does the value of Theresa 39 s income elasticity indicate that bagels are normal goods inferior goods substitutes or complements d Suppose that when the price of toy cars increases by 10 percent Theresa buys 5 percent fewer toy cars and 4 percent less of a different toy blocks. units of output . Suppose the monopolist faces the following demand curve P 100 3Q. Recall the partial equilibrium analysis of a tax from chapter 11. 5 Suppose a single price monopolist controls the market for this good. a Write down the lagrangian associated with this optimization. ii. The monopolist should Let C x be the cost of producing x units of a commodity. the decrease in revenue from the fact that increasing output marginally lowers the price the firm receives for all of its output. 1 shows the demand and cost curves facing a monopoly. Economics The monopolist has a constant marginal and average total cost of 50 per unit. Impose a specific tax of t on the monopolist. As a result the nbsp sell one more unit gets larger as the firm 39 s total output increases. Managerial Economics Suppose that a monopolist increases production from 10 units to 11 units. Total revenue would be 50 total costs would be 25 and profits would be 25. 002. A firm that expanded its scale of operation to achieve an average total cost curve such as ATC 2 could produce 240 units of output at a lower cost than could the smaller firms producing 20 Chapter 11 5. Answer A 10 1 1 1 5 30 and P B 10 1 1 3 15. D 10. 00 c. chapter 10 market power monopoly and monopsony review questions monopolist is producing at point at which marginal cost exceeds marginal revenue. If MC was the firm s original marginal cost its opt imal production decision is now given by Chapter 10 Market Power Monopoly and Monopsony. The union will sell . Of course it was regulated in order to prevent abuses. ANSWER F 11. Oct 17 2020 For example 10 units sell at 9 each resulting in total revenues of 90 11 units sell at 8. The marginal cost curve is upward sloping. In this firm is willing to produce 5 units for a total of 10 units. 34 In Figure 10 3 the single price monopolist maximizes total revenue by producing the quantity A Q5. To sell an additional unit the simple monopolist must lower the price on ALL units sold. a lower average cost per unit at 100 units output than at 99 units of output. A monopolist faces the inverse demand for its output p 30 Q The monopolist also has a constant marginal and average cost of 4 unit. Suppose that a monopolist increases production from 10 units to 11 units. d 20. An increase in the price of the good to 80 decreases the quantity demanded to 20 units. suppose that a monopolist increases production from 10 units to 11 units

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