1. Refer to Figure 2 (provided under resources). If the monopoly firm wants to m
ID: 1117344 • Letter: 1
Question
1. Refer to Figure 2 (provided under resources). If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to
Q1.
Q2
Q3.
Q4.
2. Refer to Figure 2 (provided under resources). Profit will be maximized by charging a price equal to
P5.
P4.
P3.
P1.
3. Refer to Figure 2 (provided under resources). A profit-maximizing monopoly's total revenue is equal to
P5 x Q3.
P4 x Q5.
(P5-P3) x Q3.
(P5-P4) x Q3.
FIGURE 2 Price Curwe D Curve C P3 - Cure A Curve B Q1 4Q5 Quaxtitv Q2Explanation / Answer
1) If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to Q2
Solution: Q3
Explanation: The marginal revenue curve for a monopoly firm is depicted by curve A; The demand curve for a monopoly firm is depicted by curve B; The average total cost curve for a monopoly firm is depicted by curve C; The marginal cost curve for a monopoly firm is depicted by curve D. The profits will be maximised when the quantity is Q3 where the marginal revenue curve and marginal cost curve intersects
2) Profit will be maximized by charging a price equal to P4
Solution: P5
Explanation: P5 where the demand curve and marginal cost curve for a monopoly firm intersects
3) A profit-maximizing monopoly's total revenue is equal to
Solution: P5 x Q3.
Explanation: The monopoly’s total revenue is equal to the price of the widget multiplied by the quantity sold thus would equal P5 x Q3.
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