Suppose a monopolist faces a demand curve given by P=200-4Q. Additionally, she has marginal costs given by MC=100 and total costs given by TC=25+100Q.
a) calculate the formulas for the monopolists' FC, VC, ATC, AVC, and AFC.
b) calculate the profit - maximizing choice of output, price, and profits.
Also, how come, in a perfectly competitive market, the burden of a tax is shared in the short run? Also, why do consumers bear all of the burden of a tax in the long run?
thank you!
Suppose a monopolist faces a demand curve given by P=200-4Q. Additionally, she has marginal costs given by MC=100 and total costs given by TC=25+100Q.
a) calculate the formulas for the monopolists' FC, VC, ATC, AVC, and AFC.
b) calculate the profit - maximizing choice of output, price, and profits.
Also, how come, in a perfectly competitive market, the burden of a tax is shared in the short run? Also, why do consumers bear all of the burden of a tax in the long run?
thank you!
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Related questions
Assume that a firm in a perfectly competitive market can sell its product for $35 (ie price per unit of output). Furthermore, it faces the following costs:
| Output (Q) | Total Cost |
| 0 | 25 |
| 1 | 50 |
| 2 | 100 |
| 3 | 120 |
| 4 | 155 |
| 5 | 190 |
| 6 | 250 |
| 7 | 390 |
a) Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC), and Average Cost (AC).
b) What is the profit-maximizing output level?
c) Is this firm is making a profit or loss at the profit-maximizing output level? Explain.
d) Do you think the firm will continue its production in the short run?
e) What will be the long-run price in this market?
QUESTION 22
For a perfectly competitive firm, profit maximization (or loss minimization) occurs at the level of output at which
| a. |
MR = MC. |
|
| b. |
MR = AVC. |
|
| c. |
P = ATC. |
|
| d. |
MR = ATC. |
4 points
QUESTION 23
If MR > MC, then
| a. |
profits are being maximized. |
|
| b. |
the firm is producing too much of the good to be maximizing profits. |
|
| c. |
the firm can increase its profits (or minimize its losses) by increasing output. |
|
| d. |
the firm must be incurring losses. |
4 points
QUESTION 24
If firms are earning zero economic profits, they must be producing at an output level at which
| a. |
price minus marginal cost. |
|
| b. |
total revenue equals total costs, in other words, normal profits. |
|
| c. |
price equals average variable cost. |
|
| d. |
marginal revenue equals marginal cost. |
|
| e. |
none of the above |
4 points
QUESTION 25
In the theory of perfect competition,
| a. |
the market demand curve is horizontal. |
|
| b. |
the single firm faces a horizontal demand curve. |
|
| c. |
the single firm faces a downward-sloping demand curve. |
|
| d. |
the market demand curve is downward sloping. |
|
| e. |
b and d |
