Figure 15-9 Revenue MC $34 ATC 27 24.50 21 13 Demand MR Quantity 600 800 940 116

Question

Figure 15-9 Revenue MC $34 ATC 27 24.50 21 13 Demand MR Quantity 600 800 940 1160 Figure 15-9 shows the demand and cost curves for a monopolist. 8) Refer to Figure 15-9. What is the economically efficient output level? B) 800 units D) 1160 units 9) Refer to Figure 15-9. What is the difference between the monopoly output and the perfectly D) 560 units A) 600 units C) 940 units competitive output? A) 140 units B) 240 units C) 340 units 10) Refer to Figure 15-9. What is the difference betw een the monopoly's price and perfectly competitive industry's price? A) The monopoly's price is higher by $13. B) The monopoly's price is higher by $9.50 C) The monopoly's price is higher by $21 D) The monopoly's price is higher by $3.50 11) Refer to Figure 15-9. At the profit-maximizing quantity, what is the difference between the monopoly's price and the marginal cost of production? B) S11.50 D) There is no difference. A) $8 Q) $21

Explanation / Answer

(8) (C)

Efficient output level is at intersection of demand and MC curves.

(9) (C)

Monopoly output corresponds to intersection of MR & MC curve and is 600 units. Perfectly competitive output is at intersection of demnd & MC curves and is 940 units. The difference is (940 - 600) = 340 units.

(10) (A)

Monopoly price = $34

Perfectly competitive price = $21

Monopoly prie is higher by $(34 - 21) = $13.

(11) (C)

When monopoly output is 600 units, Price is $34 and MC (= MR) is $13, so the difference is $(34 - 13) = $21.

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