Reference: Ref 29-3 Reference: Ref 29-1 __(Table: Lunch) Examine the table Lunch

Question

Reference: Ref 29-3

Reference: Ref 29-1

__(Table: Lunch) Examine the table Lunch. Joe operates a small business that makes and sells picnic lunches to people taking all-day rafting trips on the local river. The demand for the lunches is shown in the table, and the marginal cost and average cost of each lunch is a constant $4. If Joe is a monopolist, what price will he charge for a lunch in the long run?

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Reference: Ref 29-3

__(Table: Lunch) Examine the table Lunch. Joe operates a small business that makes and sells picnic lunches to people taking all-day rafting trips on the local river. The demand for the lunches is shown in the table, and the marginal cost and average cost of each lunch is a constant $4. If Joe is a monopolist, what price will he charge for a lunch in the long run? a. $9 b. $7 c. $5 d. $3 . Figure: Monopolist

Reference: Ref 29-1

__(Figure: Monopolist) Examine the figure Monopolist. The graph shows the demand, marginal revenue, marginal cost, and average total cost for a monopolist. Which statement is false? a.The quantity that would minimize average total cost is 300 units. b. The quantity at which price would equal average total cost is 375 units. c. At the profit-maximizing outcome, a deadweight loss will result. d. The profit-maximizing point occurs when average total cost equals marginal revenue.

Explanation / Answer

1. c.$5

2. d. The profit-maximizing point occurs when average total cost equals marginal revenue.

      The profit-maximizing point occurs when MR = MC

P QD TR MR 10 0 0 - 9 10 90 90 8 20 160 70 7 30 210 50 6 40 240 30 5 50 300 60 4 60 240 -60

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