ECON 1050 Chapter 15: Economics-1 (1) (dragged) 4

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17 Sep 2016

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Trick complies and gear cheats, gear complies and trick cheats. Firms in a cartel act like a monopoly and maximize economic profit. To find that profit, set the cartel"s marginal cost equal to its marginal revenue. The cartel"s marginal cost curve is the horizontal sum of the mc curve of the two firms. The marginal revenue curve is like that of a monopoly. The firms maximize economic profit by producing the quantity at which mc1= mr. Each firm agrees to produce 2,000 units and to share the economic profit. The blue rectangle shows each firm"s economic profit.

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6) Monopolistic competition differs from monopoly because in monopolistic competition A) firms maximize profits. B) firms are free to enter and exit. C) firms set marginal revenue equal to marginal cost to maximize profit. D) All of the above are differences between monopoly and monopolistically competitive firms. E) None of the above are differences between monopoly and monopolistically competitive firms.

32. Which of the following is not a difference between monopolies and perfectly competitive markets?

A. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.

B. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost.

C. Monopolies can earn profits in the long run while perfectly competitive firms break even.

D. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

40. Which of the following statements is not correct?

A. Both monopolies and monopolistically competitive firms can earn economic profits in the long run.

B. Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.

C. Only competitive firms produce the welfare-maximizing level of output.

D. Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.

43. A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

A. the profits of the firm are negative.

B. firms are likely to leave this market in the long run.

C. the firm is currently maximizing its profit.

D. All of the above are correct.

The marginal revenue curve of a monopoly crosses its marginal cost curve at $30 per unit and an output of 2 million units. The price that consumers are willing and able to pay for this outputis $40 per unit. If it priduces this output, the firms average total cost is $43 per unit, and its average fixed cost is $8 per unit. What is this producers profit-maximizing(loss-minimizing) output level and what are the firms economic profits (or economic-losses)?

ECON 1050 Chapter 15: Economics-1 (1) (dragged) 4

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