ECON 103 Study Guide - Final Guide: Price Discrimination, Profit Maximization, Deadweight Loss

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scarletwhale709

26 Aug 2016

School

Simon Fraser University

Department

Economics

Course

ECON 103

Professor

Junjie Liu

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Document Summary

Monopolist"s mr is always < the price of its good, whereas mr = p for a competitive firm. The output effect: higher output raises revenue. The price effect: lower price reduces revenue. In a completive market, equilibrium occurs where the. Each firm takes the market price as given and maximizes its profit by producing the output at which its marginal cost equals the market price. In a monopoly market, the monopolist chooses to produce the quantity at which mr=mc. P = mc at the competitive firm"s profit-maximizing quantity of output. P > mr = mc at the monopolist"s profit- maximizing quantity of output. Competitive: a supply curve shows q depends on p. Monopoly: no supply curve since q, p are jointly determined by mc, mr, demand curve. Welfare analysis: monopoly causes a reduction in cs, monopoly causes an increase in ps, monopoly causes a deadweight loss (dwl). = one that charges all consumers the same price.

Related Questions

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

1. A monopolist can increase profits by decreasing production if its currently producing at a point where:

Select one:

P = MC

P > MC

P < MR

MR = MC

2. The reason a monopoly creates a deadweight loss is that a monopolist charges a price that is _________ marginal cost.

Select one:

the same as

greater than

less than

None of the other choices is correct

3. A monopolist maximizes profits when it produces an output at the point where:

Select one:

None of the other choices is correct

P > MC

P = MC

MR > MC

P < MR

4. A monopolist knows an increase in price will have no impact on total revenue when its price elasticity of demand is:

Select one:

price inelastic

perfectly elastic

price elastic

equal to 1 (in absolute terms)

coppertoad717

Your monopoly company exhibits the following costs:

TC=60+6Q+Q² & MC=6+2Q

And the following market demand and marginal revenue functions:

Qd=598-P; MR=598-2Q

a)Find the profit maximizing level of output for the monopoly

b) At what price does the monopolist sell its good?

c)What are the monopolist profits

d)Is there any dead weight loss in the market?

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ECON 103 Study Guide - Final Guide: Price Discrimination, Profit Maximization, Deadweight Loss

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