ECON 230D2 Chapter 11: Notes

137 views6 pages

lavenderspider455

8 Feb 2017

School

Department

Course

Professor

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

Document Summary

Monopoly: occurs when there is only one firm dominating the market, other firms cannot enter, price setter. Mr and price: r = p*q, mr = r". Mr and price elasticity of demand: mr = (cid:4666)1+1(cid:4667, e = (cid:4666)(cid:3031)(cid:3044)(cid:3031)(cid:3043)(cid:4667) (cid:3043)(cid:3044) Inelastic -1 < e <0: elastic e < -1, perfectly elastic e = -inf, perfectly inelastic e = 0. Price maximization: shutdown decision, a monopoly shuts down to avoid making a loss in the short run if its price is below its average variable cost at its profit maximizing quantity. In a long run, the monopoly shuts down if the price is less than its average cost. Mathematical approach: profit maximizing point, mr = mc. Effects of a shift of the demand curve. Market power the ability to a firm to charge a price above marginal cost and earn positive profit.

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. Which of the following is true under a monopoly?

A. Monopolist chooses the highest possible price.
B. Monopolist chooses a price that is always higher than marginal cost of production.
C. Marginal revenue of a monopolist is price.
D. None of the above are true for monopoly.

2. You are the manager of a monopoly that faces a demand curve described by P = 230 -20Q. Your costs are C = 5 +30Q. The profit-maximizing output for your firm is:

A. 4
B. 5
C. 6
D. 7

3. Which of the following is true?

A. A monopolist produces on the inelastic portion of its demand.
B. A monopolist always earns an economic profit.
C. The more inelastic the demand, the closer marginal revenue is to price.
D. In the short run a monopoly will shutdown if P < AVC.

4. In a competitive industry with identical firms, long rum equilibrium is characterized by:

A. P = AC
B. P = MC
C. MR = MC
D. All of the above

5. You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q². Your firm's maximum profits are:

A. 125
B. 250
C. 100
D. 85

6. A perfectly competitive firm faces:

A. A perfectly elastic demand function
B. A perfectly inelastic demand function
C. a demand function with unitary elasticity
D. none of the above

purpleworm770

Answer the following Questions for a Monopoly Firm.

Price	Quantity	TR	MR	MC	TC	Profit
$400	0				$2,000
390	1			$200
380	2				2,360
370	3				2,500
360	4
350	5				2,720
340	6
330	7				3,060
320	8			$250
310	9				3,630
300	10			$400
290	11			$500

a) Fill in the missing information above for this Monopoly Firm. Note there are no numbers for MC and MR when Q=0.

To complete the table you need to know that the ATC of producing 4 units of output is $650 and that the Total Variable Cost of producing 6 units of output is $870.

b) State the Total Fixed Cost for this firm. Please explain how you got your answer.

c) At which unit of output does Diminishing Marginal Returns start? Please explain your answer.

d) If this firm produces in the Short Run, determine its profit maximizing/loss minimizing output level. Please explain your answer using MC and MR.

e) If this firm produces in the Short Run, determine its profit maximizing/loss minimizing price.

f) If this firm produces in the Short Run, state its profit maximizing/loss minimizing profit amount.

g) If this firm shuts down in the Short Run, determine its profit maximizing/loss minimizing profit amount. Please explain your answer.

h) What should this firm do in the Short Run in order to maximize its profits/minimize its loss (produce or shut down)? Please explain your answer using numbers.

i) Explain what this firm should do in the Long Run.

raspberryhorse277

ECON 230D2 Chapter 11: Notes

Document Summary

Get access

Related Documents

ECON 230D2 Study Guide - Final Guide: Price Elasticity Of Demand, Complementary Good, Competitive Equilibrium

M B A 8620 Chapter Notes - Chapter 9: Marginal Revenue, Average Variable Cost, Demand Curve

COMM 295 Chapter Notes - Chapter 9: Institute For Operations Research And The Management Sciences, Snob, Natural Monopoly

Related Questions