Perfect Competition and Monopoly 1. Consider this cost schedule for a perfectly
ID: 1102455 • Letter: P
Question
Perfect Competition and Monopoly 1. Consider this cost schedule for a perfectly competitive firm producing coffee cups. ht Quantity cost ML ATC $1 5 2 3 4 16 5 21 5 6 10 12 27 5 a) What is the rule to determine the profit-maximizing quantity? b) If the market price for a coffee cup is $5, how many cups vil this fim produce to maximize its profits? the necessary information and then answer part a. you need to answer this question to the table. c) What information do you need to add to this table to determine your answer? Add d) Under these conditions, is this firm making an economic profit? Add the information .Explain your answer: e) Is the firm in long-run equilibrium? Why or why not? 2. Assume that the firm is a monopoly, and this is its demand schedule for its coffee cups. A Total Quantity Cos riceT $1 $24 $20 $17 $14 $12 25 $10 $9 2020 3 4 4 2 2 14 12 18 4 5 31 a) How many cups will this firm produce to maximize its profits? b) Will the firm be making an economic profit? If so, how much? c) Will this be a stable equilibrium?Explanation / Answer
Answer:
(
(A)
tc/q
quantity
total cost
price
MC
AC
ATC
TR
MR
AR
Profit
0
1
5
1
-
0
0
-1
1
7
5
6
7
7
5
5
5
-2
2
10
5
3
5
5
10
5
5
0
3
12
5
2
4
4
15
5
5
3
4
16
5
4
4
4
20
5
5
4
5
21
5
5
4.2
4.2
25
5
5
4
6
27
5
6
4.5
4.5
30
5
5
3
a) role to profit maximizing quantity MR= MC
b) if market price is $5 where MR=MC then no of cups will be 5 units
c) TR and MR need to be calculated.
d) TR MR and profit ( TR-TC) and economic profit = $5 at quantity of 5 units.
e) yes it is in equilibrium reason LMC=LMR= LAR
(B)
tc/q
quantity
total cost
price
MC
TR
MR
ATC
profit
0
1
24
1
0
0
-
-1
1
6
20
5
20
20
6
14
2
9
17
3
34
14
4.5
25
3
12
14
3
42
8
4
30
4
18
12
6
48
6
4.5
30
5
25
10
7
50
2
5
25
6
31
9
6
54
4
5.166667
23
1)
4 units
2) profit
$30
3)
Yes
(
(A)
tc/q
quantity
total cost
price
MC
AC
ATC
TR
MR
AR
Profit
0
1
5
1
-
0
0
-1
1
7
5
6
7
7
5
5
5
-2
2
10
5
3
5
5
10
5
5
0
3
12
5
2
4
4
15
5
5
3
4
16
5
4
4
4
20
5
5
4
5
21
5
5
4.2
4.2
25
5
5
4
6
27
5
6
4.5
4.5
30
5
5
3
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