Question Help Price and cost (dollars per bottle) Minnie\'s Mineral Springs is a

Question

Question Help Price and cost (dollars per bottle) Minnie's Mineral Springs is a single-price monopoly. The graph shows Minnie's demand curve, marginal revenue curve, and marginal cost curve, and the profit-maximizing price and output The producer surplus generated from Minnie's Mineral Springs' water production and consumption is shown on the graph as Area A, A O B. A + Area B OC. C OD. B Minnie's produce the efficient quantity of water Quantity (bottles per hour) Suppose that new wells were discovered nearby to Minnies and Minnie's faced competition from new producers Choose the statement that is incorrect 0 A. Minnie's output increases O B. Consumers who purchase water from Minnie's receive less consumer surplus ( C. Minnie's economic profit decreases 0 D. Minnie's charges a lower price

Explanation / Answer

Answer
Option A
Area A
the firm produces at MR=MC
where
Q=1.5 and the price is found from demand curve at the quantity and that is
P=$7
the producer surplus is the area below price and above MC and left or the quantity.
that is area A

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will not
the efficient quantity is MC=P where Q=2.25 but the firm produces 1.5 so it is inefficient output
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option B
the competition will increase so quantity produced by the individual is increased.
the price decreases and consumer surplus increases and profit decreases.

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