Question 12 The demand schedule below lists the quantity demanded at each price

Question

Question 12 The demand schedule below lists the quantity demanded at each price in a monopolist's market The monopolist has no fixed costs and has a constant marginal cost of $45 for each additional unit produced. If the monopolist were able to perfectly price discriminate, how many units would it sell? Price $70 $60 $50 $40 $30 Quantity Question 13 The figure is drawn for a monopolistically-competitive firm, In order to maximize its profit, the firm will choose to produce what quantity at what price? IMc 100 and $140 133.33 and $6.67 100 and $90 133.33 and $123

Explanation / Answer

12) a) 3 units

Firm would sell units upto that level where price exceeds the marginal cost of firm. Till 3 units of output, price is greater than the MC but at 4th unit MC > Price.

13) a) 100 and 140

Equilibrium quantity is where MR = MC i.e. 100 units

Equilibrium price is where intersection of MR and MC meets the demand curve i.e. $ 140.

14) a) $ 0

ATC is tangent to demand curve which means firm's TR = TC.

Profit = TR - TC = TR - TR = 0

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