Question

1.

By royal decree, there is only a single toothpaste manufacturer in Arlington, and the following represents his demand curve (shown below). If the ATC of producing toothpaste is constant at $16.50, then the monopolist will produce:  

Demand	$20.00	$19.50	$19.00	$18.50	$18.00	$17.50	$17.00	$16.50	$16.00
Price	0	1	2	3	4	5	6	7	8
Quantity

Group of answer choices

A. shut down because AVC is not covered

B. 3 tubes at a total profit of $8

C. 4 tubes at a total profit of $6

D. 4 tubes at a total profit of $1.50

E. shut down because ATC is not covered

F. none of the above

2.

Monopoly is inefficient because

A. Group of answer choices production is not at minimum ATC

B. marginal revenue (MR) does not equal marginal cost (MC)

C. Price < Marginal cost

D. None of the above

E. added resources would be more valuable to society as inputs into the monopolized industry than where they are currently being used

3. (a)

Twenty-Twenty, LLC is a chartered monopoly supplier of fashion glasses frames and it produces with the following costs (shown below). What would Twenty-Twenty's output be?

Cost
Qty	1	2	3	4	5	6	7
Total Cost ($)	$5	8	9	16	25	36	49
Demand
Qty	1	2	3	4	5	6	7
Price	$13	12.50	12	11.50	11	10.50	10

Group of answer choices

A. none of the above

B. 3

C. 1

D. 0

E. 5

3(b)

Twenty-Twenty, LLC is a chartered monopoly producer of fashion glasses frames and it produces with the following demand and costs schedule (shown below). At the profit maximizing level of output, what will Twenty-Twenty's profits be? What would Twenty-Twenty's output be?

Cost
Qty	1	2	3	4	5	6	7
Total Cost ($)	$5	8	9	16	25	36	49
Demand
Qty	1	2	3	4	5	6	7
Price	$13	12.50	12	11.50	11	10.50	10

Group of answer choices

A. $11

B. $0

C. $30

D. None of the above

E. $35

3(C)

Twenty-Twenty, LLC is a monopolist producer of fashion glasses frames. It produces with the following cost and demand schedule (shown in the table below). At the profit maximizing output. the difference between Price and Marginal Cost would be: What would Twenty-Twenty's output be?

Cost
Qty	1	2	3	4	5	6	7
Total Cost ($)	$5	8	9	16	25	36	49
Demand
Qty	1	2	3	4	5	6	7
Price	$13	12.50	12	11.50	11	10.50	10

Group of answer choices

A. 2

B. $5

C.$6

D. $4.50

E. 0

F. none of the above

Answer 1

1. ATC = $16.5 at all levels of output, this implies that MC is constant = $16.5.

Q	P	TR=(P)(Q)	MR=Change in TR
0	20	0	-
1	19.5	19.5	19.5
2	19	38	18.5
3	18.5	55.5	17.5
4	18	72	16.5
5	17.5	87.5	15.5
6	17	102	14.5
7	16.5	115.5	13.5
8	16	128	12.5

Profit maximizing condition under monopoly is MR=MC. Here we can see that MR=MC at Q=4.

And at this level of output ,Profit =TR-TC= 72- (16.5)(4)=$6.

This implies that the monopolist will produce 4 tubes at a profit of $6. Hence, option(C) is correct.

2. Monopoly is inefficient because P>MC . Hence, option(D) is correct.

3. (a)

Q	P	TR=(P)(Q)	MR=Change in TR	TC	MC=Change in TC
1	13	13	-	5	-
2	12.5	25	12	8	3
3	12	36	11	9	1
4	11.5	46	10	16	7
5	11	55	9	25	9
6	10.5	63	8	36	11
7	10	70	7	49	13

Profit maximizing condition under monopoly is MR=MC.

Therefore, Twenty's Twenty output would be 5 units at which MR=MC=$9. Hence, option(E) is correct.

(b) Twenty's Twenty profit = TR-TC = (55-25)= $30.

Hence, option(C) is correct.

(c) The difference between price and marginal cost =$(11-9)= $2.

Hence, option(A) is correct.