Joe Entrepreneur can sell 5 units of output at a price of $100, but must reduce

Question

Joe Entrepreneur can sell 5 units of output at a price of $100, but must reduce price to $90 in order to sell 6 units. Joe Entrepreneur does not price discriminate. Answer questions 1-4 based on this information. 1. Joe is / is not a price taker. 2. Total revenue for 6 units of output is _______ dollars. 3. Marginal revenue for the 6th unit of output is _________dollars. 4. Average revenue for 6 units of output is _________ dollars. Joe Entrepreneur can sell 5 units of output at a p The diagram above illustrates the demand, marginal revenue and cost curves for a pure monopoly that does not practice price discrimination. Answer question 5-10 with reference to this diagram. Assume that the firm operates. . 5. The profit-maximizing output for this monopoly is _______. 6. The profit-maximizing price for this monopoly is ________ dollars. 7. At the profit-maximizing output, demand is relatively elastic / inelastic. 8. Total revenue is maximized at an output of ______ . 9. The socially optimal or allocatively efficient output is _______. 10. In the diagram above, shade the area of the deadweight loss resulting from this monopoly.

Explanation / Answer

1. Joe is not a price taker.

2. Total revenue for 6 units of output is $540 dollars.

3. Marginal revenue for the 6th unit of output is $40 dollars. (i.e. 540 -500)

4. Average revenue for 6 units of output is $90 dollars.

Diagram is missing . so, answer from 5-10 cannot be done.

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