Use the following information for a monopoly firm to answer the following three

Question

Use the following information for a monopoly firm to answer the following three questions. Assume that Q equals the level of output and all costs are economic costs. Total Revenue = 450Q - 0.5(Q squared) Marginal Revenue = 450 - Q Total cost = 2,000 + 50Q + 0.5(Q squared) Marginal cost = 50 + Q Flag this Question Question 30 1 pts 30. At the profit-maximizing or loss-minimizing output level, economic profit would equal: $8,000. $9,000 $18,000. $38,000. Flag this Question Question 31 1 pts 31.Under these conditions, the firm should produce an output of: zero (i.e. shutdown). 100. 200. None of the above. Flag this Question Question 32 1 pts 32. At an output of 200 units, average total costs equal: $160. $320. $30,000. $32,000. Flag this Question Question 33 1 pts 33. If long-run economic gains are being experienced in a monopoly market: More firms will enter the market. Entry barriers will restrict competition. Equilibrium price will rise as firms enter. None of the above

Explanation / Answer

31. Profit maximising condition: MR = MC

450 - Q = 50 + Q

400 = 2Q

Q = 200 units

30. Profit = TR - TC = 450Q - 0.5Q2 - 2,000 - 50Q - 0.5Q2 = 400Q - Q2 - 2000

= 400(200) - (200)2 - 2000 = 80000 - 40000 - 2000 = 38000

32. ATC = TC/Q = (2,000 + 50Q + 0.5Q2)/Q = (2000 + 50 x 200 + 0.5 x 200 x 200)/200

= (12000 + 20000)/200 = 32000/200 = 160

33. Entry barriers will restrict competition.

There is no free entry of new firms in monopoly market.

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