The following table lists three independent scenarios for three different firms
ID: 2496145 • Letter: T
Question
The following table lists three independent scenarios for three different firms which are either a monopolist or a perfectly competitive firm. For each row you are to fill out the missing information and to indicate, if not already indicated, whether the firm is a monopolist or a competitive firm. There are no fixed avoidable costs - all fixed costs are sunk. Abbreviations are P - price, Q - quantity, C - cost, VC - variable cost, MC - marginal cost, AC - average cost, AVC - average variable cost, AFC - average fixed cost, MR - marginal revenue, and - profit. "Min" means that the cost curve indicated is at its minimum point.Explanation / Answer
The table below provides the required data.
Market Structure
P
Q
C
VC
MC
AC
AVC
AFC
MR
PROFIT
Monopolistic
8
25
225
125
6
9
5
4
6
-25
Competitive
10
60
660
300
10
6
5
6
10
-60
Monopolistic
12
30
300
240
8
10
8
2
8
60
First observe the last row. Fixed cost is 2Q and VC is 240. AC is 10 so C is 10Q. This gives C as
2Q + 240 = 10Q
Q = 30
AVC = 240/30 = 8
Given that AVC is minimum, then it must be true that MC=AVC. Hence MC= 8.
At equilibrium, MR = MC so MR = 8.
Profit = TR - TC
=12*30 - 300
=60.
The remaining parts of the table have been filled in the same way.
Market Structure
P
Q
C
VC
MC
AC
AVC
AFC
MR
PROFIT
Monopolistic
8
25
225
125
6
9
5
4
6
-25
Competitive
10
60
660
300
10
6
5
6
10
-60
Monopolistic
12
30
300
240
8
10
8
2
8
60
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