is $12. 6. Average 24. What is the monopolist\'s profit under the following cond
ID: 1114948 • Letter: I
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is $12. 6. Average 24. What is the monopolist's profit under the following conditions? The profit-maximizing price charged for goods produced The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is S total cost for 10 units of output is $5. a. $60. b. $70 c. $100. d. $120 25. By definition, a contestable market is an imperfectly competitive situation that is subject to entry. Even if there is only one producer of a particular good, the market may NOT be contestable because: New technology can make the current good obsolete. b. New technology cannot make the current good obsolete. c. Domestic firms can potentially enter the market. d. Foreign producers of the good can provide the good to the U.S. market. 26. Private ownership of a monopoly may benefit society because the monopoly will have an incentive to lower its costs to earn a higher profit. b. price its good according to the intersection of marginal cost and average revenue. c. charge a price that prevents some people from buying. d. charge a price that is consistent with that of a benevolent social planner. 27, Monopolistic competition is characterized by which of the following attributes? 1) Free entry; (ii) Product differentiation; (ii) Many sellers a.() and (ii)only. b. (i) and (ii) only. c. (ii) and (ii) only. d. (G), (ii), and (ii) 28. When an industry has many firms, the industry is a. an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. b. an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. c. perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. d. monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products 29. Monopolistic competition differs from perfect competition because in monopolistically competitive markets each of the sellers offers a somewhat different product. Moreover, a profit-maximizing firm in a monopolistically competitive market differs from a firn in a perfectly competitive market because the firm in the monopolistically competitive market a. make zero profit in long run. b. faces a horizontal demand curve at the market clearing price. c. is characterized by setting the price at P ATC. d. has no barriers to entry.Explanation / Answer
24. B.
Price is $12, Quantity is 10 units, ATC at 10 units is $5. Profit is $12-$5= $7 per unit, therefore, for 10 units it is $70.
The monopoly profit equals (ATC-P) x Q.
The monopolist faces a downward sloping demand curve because he can sell more if he lowers the price. The profit maximizing price and output is where marginal revenue equals marginal cost, then it is extended to the market demand curve to determine what market price corresponds to that quantity.
25. b. For a contestable market to exist, there must be low barriers to entry.
26. A. The average cost curve of a monopolist falls as more goods are produced due to economies of scale.
27.D.In monopolistic competition there are large number of firms, ease of entry and exit and product differentiation.
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