a. Which rectangle in the above graph represents the firm’s Total Revenue ? Iden

Question

a. Which
rectangle in the above graph represents the firm’s Total Revenue? Identify the rectangle by its four

    letters and also provide a brief
economic/quantitative reasoning for your answer.

b. Which
rectangle in the above graph represents the firm’s Total Cost? Identify the rectangle by its four

    letters and also provide a brief
economic/quantitative reasoning for your answer.

c. Which rectangle in the above
graph represents the firm’s Total
Profits? Identify the rectangle by its four

    letters and also provide a brief
economic/quantitative reasoning for your answer.

d. If the above monopolist were to behave like a perfectly
competitive firm (operating in the

    long run), determine its output. Also explain the economic reasoning behind
your answer.

a. Which rectangle in the above graph represents the firm?s Total Revenue? Identify the rectangle by its four letters and also provide a brief economic/quantitative reasoning for your answer. b. Which rectangle in the above graph represents the firm?s Total Cost? Identify the rectangle by its four letters and also provide a brief economic/quantitative reasoning for your answer. c. Which rectangle in the above graph represents the firm?s Total Profits? Identify the rectangle by its four letters and also provide a brief economic/quantitative reasoning for your answer. d. If the above monopolist were to behave like a perfectly competitive firm (operating in the long run), determine its output. Also explain the economic reasoning behind your answer.

Explanation / Answer

It depends if the above picture represents a monopoly or perfect competition. First we will assume perfect comp then monopoly Perfect comp A. 0CGE, This is because firms always price at the profit maximizing condition where MC=MR B. 0BKL, A firm atways has a Total cost where marginal cost and ATC intersect C. BCGH, represents the firms total loss. They incurr a loss because TC is above TR. It looks as if this is a monopoly based on the last question so for a monopoly A. 0AEJ, this is the TR because Pirce is determined by the quantity demanded that corresponds to the quantity demanded at MC. B. OLEH, this is the point that shows TC because a monopoly always has a cost equal to where ATC is minimized C. ABJK, this is TR-TC D. If this was perfect competition, output would be OCEG because firms always set Price equal to the profit maximizing condition where MC=MR Hope this helps

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