1. Does the monopolist produce in the short run? a. Yes, since P > AVC. b. Yes,
ID: 1112101 • Letter: 1
Question
1. Does the monopolist produce in the short run?
a. Yes, since P > AVC.
b. Yes, since P > AFC.
c. No, since P < AVC.
d. No, since P < AFC.
2. How much output should the firm produce in the short run?
a. 0 units
b. 10 units
c 15 units
d. 20 units
e. 25 units
3. What price should be charged?
a. The firm will not produce in the short run, so no units are sold.
b. $40
c. $30
d. $27
e. $20
4. How much profit or loss will the monopolist earn in the short run?
a. TFC
b. $175
c. $200
d. $300
e. $450
5. If total fixed cost for the monopolist increases,
a. profit falls.
b. the optimal output level falls and price rises.
c. the optimal output level and price remain the same.
d. both a and b
e. both a and c.
6. In the long run, the firm builds the plant designed to produce units of output optimally.
a.20
b.25
c.35
d. 40
7. In the long run, the monopolist makes a profit of
a. $600
b. $400
C. $200
d. $100
MONOPOLY: GRAPHICAL ANALYSIS PROBLEM A For questions 1 to 7 use figure below which illustrates the demand and costs curves for a monopolist Figure 14.2 50 SMC 40 F LMC LAC 20F MR 50 Output 10 20 30 60 70 80 90 100Explanation / Answer
Answer 1 : Yes, monopolist should produce in the short run because here the price is more than average variable cost it means that Price is more than average variable cost. (P>AVC). It means that the firm should be able to cover the variable cost from it.
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Answer 2 : 20 units of output should be produced in the short run where the firm is able to cover it cost and they are able to survive in the short run. Here , the firm main motive is to survive in short run time period scanerio.
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Answer 3 :$30is the price that the firm has been charged for the product in the short run where the firm is able to cover its cost at short run time duration. It is minmum price where the firm is able to cover its cost.
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Answer 4 : Here the firm should charge a price which covers its variable cost and the total fixed costis the loss that beared by the firm in the short run time duration.
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Answer 5 : Total fixed cost for the monopolist increases than the profit falls and the optiumal output level and price remain same because fixed cost does not affect on the price of the goods consumed in time period duration.
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Answer 6 : In the long run the firm builds the plant to produce units of output optiumal is 40 units where LMC= MR where the firm can attain maximum profit in this situation.
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Answer 7 : Total profit of the firm in the long run selling 40 units of output is difference between the total revenue minus total cost it means that
TR =40*40 =1600
TC =40*25 = 1000
Therefore the profit in long run is $600.
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