2. The graph below represents the average total cost and marginal cost curves (A

Question

2. The graph below represents the average total cost and marginal cost curves (ATC &MC;), and the marginal revenue and demand curves(MR & D), for a monopoly. First, fill in the blanks below to indicate the name of each of the curves. (If you want, you may use the initials.) Then, answer the questions below the graph. 100T 90 A. 7 . B. 60 30 C. 201 D. 01 23 456 7 8 9 1011 12 13 1415 16 17 18 19 E. If this company acts as a profit-seeking monopoly, it would produce a quantity of about units per month, while the price would equal about F. Is the company making an economic profit in this situation? G. If the this company is forced to act like a competitive firm, the quantity equals about units per month while the price would equal about

Explanation / Answer

A.

Curve A represents the MC curve.

B.

Curve B represents the Demand curve.

C.

Curve C represents the ATC curve.

D.

Curve D represents the MR curve.

E.

The monopolist profit maximising condition are;

MR=MC,

Therefore according to this condition Quantity will be= 13 unit

Price will be =$50

F.

Yes, At this price and quantity there is economic profit and profit of the monopoly will be= (P-ATC)*Q

=(50-30)*13

=$260

G.

If firm acts like then the profit-maximizing condition will be;

Demand =MC(supply)

Therefore the price will be = $45 approximately

quantity will be =17.50 approximately.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.