Carefully draw the appropriate revenue and cost curves for a profit-maximizing monopolist, which is indifferent between...

Carefully draw the appropriate revenue and cost curves for a profit-maximizing monopolist, which is indifferent between producing and not producing in the short-run. Show the deadweight loss caused by the monopoly. In the long run, will the firm produce more or less? (8 points)

Solutions

Expert Solution

A monopoly will be indifferent between producing or not producing in short-tun when there is zero economic profit i.e. P=MC=AVC. Here there will be no dead wright loss because P=MC and output is socially optimal.

In long-run, if firm can increase price which is easier for monopoly then it should produce more.

Rahul Sunny answered 2 years ago

Next > < Previous

Related Solutions

Assume a profit maximizing monopolist faces the following demand, marginal revenue and cost functions:

Assume a profit maximizing monopolist faces the following demand, marginal revenue and cost functions: Demand: P = 400 - 50Q Total Cost: TC = 100Q Marginal cost MC = 100 Marginal Revenue MR = 400 – 100Qa) Find the profit maximizing output level for the monopolist.b) At this level of output what price will the monopolist charge?c) What is the total profit for the monopolist?d) If the monopolist were a revenue maximizer instead of a profit maximizer, what would be...

A profit-maximizing monopolist charges a price of $36. The intersection of the marginal revenue and marginal...

A profit-maximizing monopolist charges a price of $36. The intersection of the marginal revenue and marginal cost curves occurs where output is 20,000 units and marginal cost is $24. Average total cost for 20,000 units of output is $32. As a result, the monopolist’s profit is more than $80,000. true or false The continuous downward slope of the average total cost curve suggests that the profit-maximizing natural monopolist is able to exploit economies of scale to keep competitors from successfully...

why is the level of output at which marginal revenue equals marginal cost the profit maximizing...

why is the level of output at which marginal revenue equals marginal cost the profit maximizing output?

Why is the level of output at which marginal revenue equals marginal cost the profit maximizing...

Why is the level of output at which marginal revenue equals marginal cost the profit maximizing output?

Do you think the monopolist acts as profit maximizing ( price , cost ) ? illustrate...

Do you think the monopolist acts as profit maximizing ( price , cost ) ? illustrate your answer with graph.

If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost,...

If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost, should it produce more, less or the same? Why? What is the profit-maximizing quantity for any firm to produce?

Draw a graph for a monopoly with demand, marginal revenue, and marginal cost curves.

Assignment: Draw a graph for a monopoly with demand, marginal revenue, and marginal cost curves. Identify the profit-maximizing output level (Qm) and price (Pm). (Photos of your work are not accepted) Suppose the monopolist sells Qm units of output at the regular price and then puts the product on sale at a lower price, Ps. Show the new price and quantity. What happens to the firm’s profits? Does price discrimination lead to a more efficient or less efficient outcome? Why...

The profit-maximizing monopolist Alga has the cost function C (y) = 16y and meets an (inverse)...

The profit-maximizing monopolist Alga has the cost function C (y) = 16y and meets an (inverse) demand function: p (y) = 80 - y What is the maximum profit? Draw a picture and enter the welfare loss in the figure. Explain the concept of welfare loss. Assume finally that the introduction of a tax of SEK 4 per unit, which then becomes Algas profit-maximizing price?

2 a.) Draw the demand, marginal revenue and marginal cost curve for a monopolist. Show the...

2 a.) Draw the demand, marginal revenue and marginal cost curve for a monopolist. Show the equilibrium price and quantity supplied and total profit. Show the equilibrium price and quantity supplied and total profit. b.) Suppose new policy suggest the government can imposed a tax on monopolists equal to 25 percent of their economic profits, how this affect the output level of the firm? How about the price? Explain.

Draw the graph for a monopoly with demand, marginal revenue, and marginal cost curves. Identify the...

Draw the graph for a monopoly with demand, marginal revenue, and marginal cost curves. Identify the profit-maximizing output level (Qm) and price (Pm). Suppose the monopolist sells Qm units of output at the regular price and then puts the product on sale at a lower price, Ps. Show the new price and quantity. Identify the consumer surplus of the additional sales. What happens to the firm’s profits and Does price discrimination lead to a more efficient or less efficient outcome?...

Subjects