1. Compared to a perfectly competitive industry, a monopolist that faces the sam

Question

1. Compared to a perfectly competitive industry, a monopolist that faces the same demand and cost conditions will a.) Produce more output b.) Charge a higher price c.) Create less deadweight loss d.) Earn the same profits e.) Increase consumer surplus and decrease producer surplus

2.eff Corp is a profit-maximizing, perfectly competitive firm in both the output and input markets. Reff is currently in long-run equilibrium with total revenue of $1,000, marginal cost of $5, and average variable cost of $4. Reff

Explanation / Answer

1) The correct answer is option B = Charge a higher price.

The rest of the options are incorrect. Monopoly decreases output to increase the price. It also created dead weight loss as it does not operate at equilibrium (like in perfect competition). It always makes more profit. It increases producer surplus and decreases consumer surplus.

2) As per the question, the firm is operating in perfect competition and is the long run equilibrium and hence TAC should be equal to MR = MC.

The formula of TAC = MR = MC only is being satisfied when output is 200 and fixed cost is 200.

With output 200, we have marginal revenue as $5 and total revenue as $1000 hence output must be 200.

With output as 200 and fixed cost as 200, the variable cost will be 200 * 4 = $800. There fore total cost = $1000.

The correct answer is option C = Output 200 and Fixed cost 200.

Hope my solution solves your query.

Regards

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