Each correct answer is worth 1/2 percentage point extra towards your fourth exam

Question

Each correct answer is worth 1/2 percentage point extra towards your fourth exam Bubble in your answer on a green seantron. They are due at the beginning of class on 4/29. A monopolist produces an efficient quantity of output but it is still inefficient because it charge a price that exceeds marginal coM and the mulling profit is a social cost. The monopolist chooses the quantity of output at which marginal revenue equals marginal cost and then uses the demand curve lo find the price that will induce consumers to buy that quantity. Using regulations to force a natural monopoly to charge a price equal to its marginal cost of production will cause the monopoly to lose money and exit the industry. Because monopolistically competitive firms earn zero profits in the long run, deadweight loss will be eroded to zero as well. The long run in monopolistically competitive markets is a tangcncy between the MC curve and the ATC curve. Consider the following payoff matrix:

Explanation / Answer

For the monopolist, marginal revenue is always less than the price of the good

To maximize output, monopolies produce the quantity at which marginal supply is equal to marginal cost.

The government may wish to regulate monopolies to protect the interests of consumers.

A monopolistically competitive industry achieves long-run equilibrium through the adjustment of the market price the number of firms in the industry, and the scale of production of each firm. These adjustments mean that each firm produces at a point of tangency between its negatively-sloped average revenue (demand) curve and its long-run average cost curve.

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