The firm depicted in the table below is in a PERFECTLY COMPETITIVE MARKET. Compl
ID: 1193635 • Letter: T
Question
The firm depicted in the table below is in a PERFECTLY COMPETITIVE MARKET. Complete the following table: (6points)
Quantity
Price
($/unit)
Marginal revenue
Total revenue
Total cost
Average
total cost
Marginal cost
0
$20
$200
10
$300
20
$460
30
$660
40
$1000
50
$1500
The profit maximizing price is $_________________.
The profit maximizing quantity is ________________.
The firm is making $__________________ in profit.
(7 points) A monopolist can produce its output at a constant average and constant marginal cost of:
ATC = MC = 5
The monopoly faces a demand curve given by the following function:
Q= 53-P
And a marginal revenue curve that is given by the function:
MR = 53 – 2Q
Draw the following:
The firm’s demand curve
The firm’s marginal revenue curve
The firm’s marginal cost curve
What is the monopolist’s profit maximizing price?
What is the profit maximizing quantity for this monopolist?
How much profit is the monopolist making?
Suppose the market is no longer depicted by a monopoly, but has become perfectly competitive. What would the profit maximizing price and quantity be if the market were perfectly competitive?
Quantity
Price
($/unit)
Marginal revenue
Total revenue
Total cost
Average
total cost
Marginal cost
0
$20
$200
10
$300
20
$460
30
$660
40
$1000
50
$1500
Explanation / Answer
Profit in this competitive structure in negative. Thus, we need to minimize loss. Loss is minimum at 20th and 30th unit but as AC falls beyond 20th unit thus, 30 units output will be produced, profits will be -60 and profit maximizing price is $20/unit.At 30th unit MR=MC also.
For monopolist;
MR=MC
or, 53-2Q=5
or, 2Q=48
or, Q=24
Therefore, P=53-24=29
Profit = PQ-CQ=24x29-5x24=24x24=576
Demand curve is downwards sloping straight line.
Marginal revenue curve is also downwards sloping straighr line but its slope is twice of the demand curve.
The marginal cost curve is horizontal.
If that happens then P=MC=5
Thus, Q=48
Quantity Price($/unit) MR(Marginal Revenue) TR(Total Revenue) TC(Total Cost) ATC(Average Total Cost) MC(Marginal Cost) 0 20 200 10 200 200 300 30 100 20 200 400 460 23 160 30 200 600 660 22 200 40 200 800 1000 25 340 50 200 1000 1500 30 5000Related Questions
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