ECON 1B03 Study Guide - Final Guide: Monopolistic Competition, Nash Equilibrium, Perfect Competition
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1. 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: ( I put A)
Ā | to both perfectly competitive firms and monopolies |
Ā | only to monopolies |
Ā | only to perfectly competitive firms |
Ā |
only to firms that can employ discriminatory pricing strategies 2. If a monopolist or a perfectly competitive firm is producing at a break-even point, then: ( I put II, IV)
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Consider the following market demand schedule and total costs for a monopoly.
Q | P | TR | TC | MR | MC | Profit | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
0 | 45 | Ā | 4 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
1 | 40 | Ā | 9 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
2 | 35 | Ā | 19 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
3 | 30 | Ā | 39 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
4 | 25 | Ā | 61 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
5 | 20 | Ā | 91 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
6 | 15 | Ā | 130 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
7 | 10 | Ā | 172 | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā | Ā |
a) Fill in the blanks.
b) How is the relationship between price and MR different between monopolistic and perfectly competitive markets?
c) Would the demand curve facing a monopolistic competitive market be more or less elastic than the demand curve facing a monopolist, why? Do firms in a monopolistically competitive market make long-run economic profits, why or why not?