This graph illustrates the demand for computers in a small country. To develop a

Question

This graph illustrates the demand for computers in a small country. To develop a domestic computer industry, the government prohibits imports of computers and gives a single local firm the right to produce and sell computers. The demand curve shows the local demand for computers. The cost curves show the marginal cost (MC) and average total cost (ATC) of the single producer. The graph also shows the marginal revenue curve faced by this firm.

http://courses.aplia.com/problemsetassets/micro/Lemke_Monopoly_II/computers.gif

4.1. How many computers will the monopolist sell to maximize profits?

4.2. At what price will the monopolist sell each computer?

4.3. How much profit does the monopolist earn?

Explanation / Answer

4.1. How many computers will the monopolist sell to maximize profits? 400 4.2. At what price will the monopolist sell each computer? 2000 4.3. How much profit does the monopolist earn? TR-TC (2000*400)-(1000*400)=400,000 Hope this helps

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