The interactive monopoly lab uses several terms you will want to be familiar wit
ID: 2494601 • Letter: T
Question
The interactive monopoly lab uses several terms you will want to be familiar with. Please complete each sentence with the term(s) that best fit. Note that not all terms will be used. The additional cost for the monopoly to increase the quantity produced by one is Unlike a perfectly competitive firm, a monopoly has price- setting ability, which means that its curve is downward sloping. Once you find the monopolist's profit-maximizing quantity, you can calculate its profit/loss from each unit sold by subtracting the from the price charged. The quantifies the monopoly's cost to society due to the higher price and lower quantity it produces compared to perfect competition, assuming the monopoly's marginal cost curve becomes the perfectly competitive market's curve. The monopoly's curve has twice the negative slope of its demand curve. Open up the monopoly interactive lab and use it to answer the following question. Note that you may want to use the "Advanced" or "All" tab of the legend to turn on display of some of these elements. Categorize each of the following according to whether or not they would change if fixed cost changes. Open the interactive monopoly lab, and use it to answer these questions. In each question, assume that nothing else changes except what is specifically mentioned. You may need to use the "Advanced" or "All" tab of the legend to turn on display of some of these elements.Explanation / Answer
(Q-1)
(1) Additional cost to increase quantity by one - Marginal Cost
(2) Price ability means its demand curve is downward sloping.
(3) Calculate profit/loss by subtracting Average total cost from price.
(4) Deadweight loss quantifies loss to society.
(5) Marginal revenue has twice the slope of demand curve.
(Q-2)
(1) Affected by Fixed cost - ATC curve, AFC curve, Profit/loss
(2) Not affected by fixed cost - Price, MR, Demand, AVC
(Q-3)
(1) As demand for a monopolist's product increases, profit Increases [Price and costs remaining same].
(2) If economies of scale increase, quantity produced increases [Since average cost per unit keeps decreasing, thus increasing profit].
(3) As fixed cost decreases, vertical distance between ATC and AVC decreases [because Average fixed cost (= ATC - AVC) falls].
(4) As demand becomes more price-inelastic, price charged increases and deadweight loss increases.
(5) As fixed cost decreases, rate of increase in marginal cost remains unchanged [Since fixed costs don't affect marginal costs].
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