ECON201 Lecture Notes - Lecture 10: Economic Equilibrium, Price Ceiling, Monopsony

57 views10 pages

redwalrus207

9 Aug 2016

School

University of Waterloo

Department

Economics

Course

ECON201

Professor

Zhen He

For unlimited access to Class Notes, a Class+ subscription is required.

jasleen3900 and 38906 others unlocked

ECON201 Full Course Notes

Verified Note

15 documents

Document Summary

The monopolist"s average revenue curve is also the market demand curve . Mr is twice the slope of the demand curve (it is steeper). Mr and ar hit the vertical axis at the same point. The mr curve hits the horizontal (quantity) axis at half the quantity as the demand curve. For all linear demand functions with the form: P(q)= a-bq must be derived for p not q. Mr=a-2bq: at q*, mr = mc. If the firm produces q1 it sacrifices some profit because the extra revenue exceeds the cost of producing them. Increase q* to q2 would reduce profit because the additional cost would exceed the additional revenue. Mr is the slope of the total revenue curve, and mc is the slope of the total cost curve. The profit-maximizing output is q* = 10, the point where mr=mc (i. e. , slopes of the total revenue and total cost curves are equal).

Related Questions

4. Suppose a firm's inverse demand curve is given by P = 120 - 0.5Qand its cost equation is C = 420 + 60Q + Q^2
a. Find the firm's optimal quantity (Q), price, and profit:

(1) by using the profit and marginal profit equations and

(2) by setting MR = MC.

b. Suppose instead that the firm can sell any and all of its output at a fixed market price of P = 120. Find the firm's optimal output.

blackhorse374

6. Power Printers Total Costs (per hour)

q TC

0 65

1 80

2 95

3 120

4 150

5 200

If the price of a printer is $50 in this perfectly competitive industry, what is the profit-maximizing rate of output?

7. Which of the following is NOT true in a perfectly competitive market?

a. There is free entry and exit into the industry.

b. Each firm produces a differentiated product.

c. Each firm faces a perfectly elastic demand curve.

d. Price is equal to marginal revenue at every output level for the firm.

8. A perfectly competitive firm should always continue to operate in the short run as long as:

a. P < ATC at the rate of output where MR = MC.

b. P < AVC at the rate of output where MR = MC.

c. MR > AVC at the rate of output where MR = MC.

d. MR > AFC at the rate of output where MR = MC.

9. A firm that makes zero economic profits:

a. Must eventually go bankrupt.

b. Should shut down.

c. Incurs a loss, but should not shut down.

d. Covers all its costs, including a provision for normal profit.

10. A monopoly firm is different from a competitive firm in that:

A. There are many substitutes for the monopolistâs product whereas the competitive firmâs demand curve is perfectly elastic.

B. The monopolistâs demand curve is perfectly inelastic, whereas the competitive firmâs demand curve is perfectly elastic.

C. The monopolist can influence the price in the market, whereas the competitive firm is a price taker.

D. All of the above

taupewombat30

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

azureshark954

ECON201 Lecture Notes - Lecture 10: Economic Equilibrium, Price Ceiling, Monopsony

ECON201 Full Course Notes

Document Summary

Get access

Related Documents

ECON201 Chapter Notes - Chapter 8: Profit Maximization, Sunk Costs, Perfect Competition

ECON201 Study Guide - Final Guide: Oligopoly

[ECON 201] - Final Exam Guide - Everything you need to know! (33 pages long)

Related Questions