1.) For a monopolistic competitive firm : A) total revenue is a straight, upslop
ID: 1122852 • Letter: 1
Question
1.) For a monopolistic competitive firm :
A) total revenue is a straight, upsloping line because a firm's sales are independent of product price.
B) the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold.
C) the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.
D) the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold.
2.) the demand for a product is p=200-Q. If the market is structured as a monopoly, the monopolist has total cost given TCm=2Q+.5Q^2, and the marginal reveneue is MR = 200-2Q marginal costs is MCm=2 + Q. What is the price that will maximize profit?
options: 133, 134, 101, 59
Explanation / Answer
Q1
Answer
Option C
the MR is double sloped than demand curve so it is below the demand curve also the price changes for all unit if one more unit is sold because the firm can charge only one price and can not discriminate between consumers.
Q2
The monopolist produces at MR=MC
MR=200-2Q................ MR is double sloped than demand curve
MC=2+Q
equating both
200-2Q=2+Q
3Q=198
Q=66
P=200-66=134
the price is $134
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