ECON 3411 Lecture Notes - Lecture 37: Inverse Demand Function, Marginal Revenue, Marginal Cost

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magentasardine691

19 Jan 2018

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What is the maximum price per unit a monopolist can charge to be able to sell 3: suppose the i(cid:374)(cid:448)erse de(cid:373)a(cid:374)d fu(cid:374)(cid:272)tio(cid:374) for a (cid:373)o(cid:374)opolist"s produ(cid:272)t is gi(cid:448)e(cid:374) (cid:271)y (cid:1842) = 10 2(cid:1843). The maximum price the monopolist can charge for 3 units is: (cid:1842) = 10. The marginal revenue at 3 units for this inverse linear demand is: (cid:1844) = (cid:883)(cid:882) (cid:884)(cid:4666)(cid:884)(cid:4667)(cid:4666)(cid:885)(cid:4667) = : a profit-maximizing monopolist should produce the output, (cid:1843) , such that (cid:1844)((cid:1843)) = ((cid:1843)) marginal revenue equals marginal cost: 24. 5. profit-maximizing price, quantity and maximum profits: suppose the i(cid:374)(cid:448)erse de(cid:373)a(cid:374)d fu(cid:374)(cid:272)tio(cid:374) for a (cid:373)o(cid:374)opolist"s product is given by (cid:1842) = 100 2(cid:1843) and the cost function is ((cid:1843)) = 10 + 2(cid:1843) . Profit-maximizing output is found by solving: (cid:883)(cid:882)(cid:882) (cid:886)(cid:1843) = 2 (cid:1843) = The profit-maximizing price is: (cid:1842) = 100 (cid:884)(cid:4666)(cid:884)(cid:886). (cid:887)(cid:4667) = (cid:883). Thus, there is no supply curve for a monopolist, or in markets served.

Related Questions

The table below presents the demand schedule and marginal costs facing a monopolist producer.

Q	P($)	TR($)	MR($)	MC($)
0	8			-
1	7			1
2	6			2
3	5			3
4	4			4
5	3			5
6	2			6
7	1			7
8	0			8

Instructions: Round your answers to the nearest whole number and include a negative sign if appropriate. Leave no cells blank. Enter 0 if appropriate.

a. Fill in the total revenue and marginal revenue columns.

b. What is the profit-maximizing level of output?

c. What price will the monopolist charge for the quantity in part (b)?

whiteoyster220

Answer the following questions pertaining to monopolist production.

1) If a monopolist is producing in the inelastic portion of its demand curve, which of the following will occur if the monopolist decreases its price?

a. Marginal revenue will decrease, but profits will increase.

b. Marginal revenue will increase, but profits will decrease.

c.Total revenue will decrease, but profits will increase.

d.Both total revenue and profits will decrease.

e. Both total revenue and profits will increase.

2) Which of the following statements is true for a perfectly competitive firm but not true for a monopoly?

a.The firm's price is equal to its average revenue.

b.The firm cannot affect the market price for its good.

c.It is difficult for other firms to enter the industry.

d. The demand for the firm's product is unit elastic.

e.The firm must lower its price in order to sell more of its product.

3) Monopolies are inefficient for which of the following reasons?

a. They produce too little of the good.

b.They produce too much of the good.

c. They do not produce an output level at which marginal cost equals marginal revenue.

d. The marginal cost of producing the good is too low.

e. The firm is too large.

4) Which of the following is necessarily true of the profit-maximizing equilibrium of a monopolist who sets a single price?

a. Price equals average total cost.

b. Price is greater than the marginal cost.

c. Average total cost is at its minimum level.

d. Marginal revenue is greater than marginal cost.

e. Marginal cost is minimized.

champagnerabbit678

If a monopolist or a perfectly competitive firm is producing at a break-even point, then:
i. average revenue is equal to average variable cost
ii. average revenue is equal to average total cost
iii. total revenue is equal to total variable cost
iv. total revenue is equal to total cost

iii

i and iii

ii and iv

A natural monopoly, such as a local electricity provider, is the result of:
i. a firm owning or controlling a key input used in the production process
ii. economies of scale existing over a wide range of output
iii. long-run average total costs declining continuously as output increases
iv. long-run total costs declining continuously as output increases

What do economies of scale, the exclusive ownership of essential raw materials used in the production process, and patents have in common?

they are all barriers to entry

they all help explain why a monopolists demand and marginal revenue curves are identical

they must all be present before a monopolist may practice price discrimination

they all help explain why a firms short run average total cost curve is U-shaped

#10

The principle that a firm should produce up to the point where the marginal revenue (MR) from the sale of an extra unit of output is equal to the marginal cost (MC) of producing the extra unit applies:

to both perfectly competitive firms and monopolies

only to monopolies

only to perfectly competitive firms

only to firms that can employ discriminatory pricing strategies

#11

A monopoly is producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $8 per unit and is incurring average variable costs of $5 per unit and average total costs of $10 per unit. Given this information, it may be concluded that the firm:

is operating at maximum total profit

is operating at a loss that could be reduced by shutting down

is operating at a profit that could be increased by producing more output

is operating at a loss that is less than the loss incurred by shutting down

#12

Suppose the demand function for a profit maximizing monopolists good is P = 120 - 0.2Q, its total cost function is TC = 40 + 4Q + Q2, and its marginal cost function is MC = 4 + 2Q. If the firm uses a uniform pricing strategy, then rounded to the nearest unit of output and to the nearest dollar the firm will:

produce 48 units of output, charge a price of $110, and earn a total profit of $5280

produce 48 units of output, charge a price of $110, and earn a total profit of $2744

produce 52 units of output, charge a price of $134, and earn a total profit of $5322

produce 52 units of output, charge a price of $134, and earn a total profit of $4016

magentabuffalo597

ECON 3411 Lecture Notes - Lecture 37: Inverse Demand Function, Marginal Revenue, Marginal Cost

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