Based on the above graph, answer the following questions for a monopoly and a pe

Question

Based on the above graph, answer the following questions for a monopoly and a perfectly competitive firm. A. For the monopolist:

i. Profit maximizing output =

ii. ATC =

iii. AR =

iv. Price =

v. Total Revenue =

vi. Total Cost =

vii. Profit =

B. For the perfectly competitive firm:

i. Profit maximizing output =

ii. ATC =

iii. AR =

iv. Price =

v. Total Revenue =

vi. Total Cost =

vii. Profit =

C. Discuss the differences you observe in your answers above between the monopoly

and perfectly competitive firm.

Explanation / Answer

For monopoly :--

1] max profit output when MC = MR
i.e. where curves intersect => 20 [ans]

2] ATC = 18 (from graph) for Q = 20

3] AR = 30

4] Price = 30 ( from demand curve)

5]tot revenue = quantity * price = 600

6]tot cost = ATC * quantity = 18 * 20 = 360

7]profit = tot revenue - tot cost = 600 - 360 = 240


The answers to all the above will be exactly the same for a perfectly competitive firm. This is because , here for the monopoly we have been given the price whereas a perfect competition takes the market price as set. The answers here would vary if the monopoly begins setting its own prices

Hope this helps

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