llbit 10-3 humbe it on the o of ese h types of b ow imp ning a moi e easily er r
ID: 1121280 • Letter: L
Question
llbit 10-3 humbe it on the o of ese h types of b ow imp ning a moi e easily er rs, interne Quantity ingle sel ny pric 2a. Looking at Exhibit 10-3. The profit-maximizing single-price monopolist charges a price and produce output at which points? Explain why the monopolist would charge a price and produce output at the points you choose. Please answer questions 2a and 2b below. 2b. Refer to Exhibit 10-3. Is the monopolist making a profit or a loss at the profit- maximizing level of output? Explain an ma om pe owing enge oughExplanation / Answer
Q2
a)
Monopolist maximize profit at MR=MC
where
Q=q1 and P=$P5
the MR=MC is the profit maximizing condition because the profit is a sum of marginal profit, marginal profit means to profit from selling one more unit, the marginal profit =marginal revenue-marginal cost, to maximize profit the profit from last unit sold should be zero which means the 0=MR-MC
which we write as MR=MC, the profit-maximizing condition.
b)
profict=(P-ATC)*Q
ATC<P, ATC=P2 where the price is P=P5
sp the firm is maxing profit.
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