2. How does a pure monopolist maximize profits? Explain clearly, with reference to a graph showing...

2. How does a pure monopolist maximize profits? Explain clearly, with reference to a graph showing the firm's output and pricing decisions

Expert Solution

Answer:

A profit maximising monopolist will set his price and output at the point where the Marginal Revenue equals Marginal Cost. This is the profit maximising price and output.

From the above figure we can analyse the price and output deceision of a monopolist. The AR curve is the demand curve of the monopolist and the slope of the Marginal Revenue curve is twice the slope of the demand curve. Inorder to sell more the monopolist must lower the price. So the marginal revenue from additional unit decreases (less than price) that is why the the MR curve lies below the Demand Curve (AR curve).

In the figure the monopolist will set the output at point E where the MR curve equals MC. The equlibrium quantity is OM. The equilibrium price is OP. The average cost (cost per unit) is OT. It is lower than the price. The profit of the monopolist is shown by the shaded area PP'LT. It is the profit per unit of the output.

Rahul Sunny answered 6 months ago

explain the process a monopolist goes through to maximize profits.

1..A pure monopolist will maximize profits by producing at that output where price and marginal cost...

1..A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal. A)True B)False 2..In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to: A)average total cost. B)marginal revenue. C)average variable cost. D)average cost. 3..Which is not true for a monopolistically competitive industry? A).Firms tend to operate with excess capacity. B). Each firm faces a downward-sloping demand curve. C). These firms earn zero...

For the Pure Monopoly Market Structure 2 a. For the monopolist, please explain in detail the...

For the Pure Monopoly Market Structure 2 a. For the monopolist, please explain in detail the steps required to determine: Creative Commons Attribution 4.0 License, CC BY Charles Hackner Houston Community College unless otherwise noted. i. The firm’s optimal level of output. ii. The firm’s product price that would correspond to that optimal level of output. iii. If the firm has achieved maximum profit iv. If the firm has achieved minimum profit Use the MR MC approach along with the...

Please no copy and paste!!! MNEs try to maximize profits. How could MNEs maximize profits and...

Please no copy and paste!!! MNEs try to maximize profits. How could MNEs maximize profits and minimize profit volatility at the same time?

1. A multi-plant monopolist will maximize profits where a. the marginal revenue in each plant is...

1. A multi-plant monopolist will maximize profits where a. the marginal revenue in each plant is equal to the marginal cost in this plant b. the marginal revenue of monopoly is equal to the marginal cost of each plant c. average cost is at its minimum in both plants d. none of the above

Refer to the above graph showing a linear demand curve for a monopolist. In which range...

Refer to the above graph showing a linear demand curve for a monopolist. In which range of the demand curve (or output quantity) will the firm operate

Draw a graph of a monopolist. Show and explain why the monopolist is not productively and...

Draw a graph of a monopolist. Show and explain why the monopolist is not productively and allocatively efficient.

Read and explain a graph showing how government tax revenue is spent

19. To maximize profits, a single-price monopolist will produce where Marginal costs = Marginal revenue: establishing...

19. To maximize profits, a single-price monopolist will produce where Marginal costs = Marginal revenue: establishing a price that is greater than their marginal cost. True False 20. As a consequence of the perfectly competitive firm producing the quantity of output at which: price equals marginal revenue and marginal cost, it will achieve "allocative efficiency" in the deployment of societies scarce resources. True False 21. In the "long-run," the perfect competitive achieves technical efficiency and the firm will produce at:...

Explain and illustrate how a monopolist can earn economic profits in the short run. Can the...

Explain and illustrate how a monopolist can earn economic profits in the short run. Can the monopolist maintain the profit into the long run? Explain. and Using law of diminishing returns, explain the shape of the marginal product curve( use diagram to support answer)

Question