MGEA02H3 Chapter : Week 8 study guide

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lavenderdonkey6

1 Dec 2010

School

UTSC

Department

Economics for Management Studies

Course

MGEA02H3

Professor

Gordon Cleveland

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MGEA02H3 Full Course Notes

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Chapter 10 monopoly, cartels, and price discrimination notes. N monopoly a market containing a single firm. N monopolist a firm that is the only seller in a market. N monopolist"s marginal revenue is less than price at which it sells its output; thus monopolist"s mr curve is below demand curve. N monopoly is a market structure in which an entire industry is supplied by a single firm. The monopolist"s own demand curve is identical to the market demand curve for the product. The market demand curve is the monopolist"s average revenue curve, and its marginal revenue curve always lies below its demand curve. N a single-price monopolist is maximizing its profits when its marginal revenue is equal to marginal costs. Since marginal costs are positive, profit maximization means that marginal revenue is positive. Thus, in turn, elasticity of demand is greater than 1 at the monopolist"s price-maximizing level of output.

Related Questions

Suppose a monopolist faces a demand curve for its output of P = 300âQ. This means that the marginal revenue curve of the monopolist is M R = 300 â 2Q. Assume that the marginal cost of production is constant and equal to $40.

a) Write down an expression for the monopolists profit, as a function of the quantity of output it produces.

b) If the monopolist must charge the same price for all units of output that it sells (that is, if the monopolist is a single price monopolist), what level of output will maximise the monopolists profit? What price will the monopolist charge? What is its level of profit?

c) If this were a competitive market instead of a monopoly, what level of output would be produced and what price would be charged? What is the level of profit for firms if it were perfectly competitive?

d) Draw a diagram of demand, marginal revenue, and marginal cost that illustrates your answer to part b). From this work out consumer surplus and producer surplus.

e) Draw the same diagram but for your answer to c), the case of the competitive market. From this work out consumer surplus and producer surplus. How much deadweight loss is there from the monopoly? Why?

sangriapug675

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

1. For a single-price monopoly, marginal revenue is

a. equal to the price for the first unit of output.

b. less than the price for all units of output after the first unit.

c. greater than price. horizontal.

d. a and b

2. The demand curve facing a monopolist is:

a) horizontal, the same as that facing a perfectly competitive firm.

b) upward sloping, the same as that facing a perfectly competitive firm.

c) downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm.

d) downward sloping, the same as that facing a perfectly competitive firm.

lavenderchinchilla784

MGEA02H3 Chapter : Week 8 study guide

MGEA02H3 Full Course Notes

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