A monopolist in Ba can produce at constant marginal cost of MC = 10. The monopolist faces a market demand curve given by Q = 50 - P. You can assume that average cost is same as marginal cost.

a) Calculate the profit-maximizing price-quantity combination for the monopolist.

b) Compute the monopolist’s profits and consumer surplus.

c) What output level would be produced by this industry under perfect competition?

d) Calculate the consumer surplus obtained by consumers under perfect competition.

e) Compute the deadweight loss from monopoly.

7. Which of the following statements is (are) correct?

(x) A firm has a fixed cost of $16,000 in its first year of operation. When the firm produces 4,000 units of output, its total costs are $65,000. The marginal cost of producing 200 more units beyond 4,000 units is $28 per unit. Therefore, the total cost of producing 4,200 units is $70,600

(y) A firm has a fixed cost of $12,800 in its first year of operation. If the firm produces 400 units of output,

its average total cost is $110. The marginal cost of producing the 401st unit of output is $150 and the marginal cost of producing the 402nd unit is $165. Therefore, the variable cost of producing 402 units is more than $31,525.

(z) A firm has a fixed cost of $10,000 in its first year of operation. When the firm produces 3,000 units of output, its total costs are $45,000. When it produces 3,050 units of output, its total costs are $46,600.

If the marginal cost of each of the 50 additional units of output is the same then the marginal cost of producing the 3,015th unit of output is $32.

A. (x), (y) and (z)

B. (x) and (y) only

C. (x) and (z) only

D. (y) and (z) only

E. (x) only

9. At the current level of output, a profit-maximizing firm in a competitive market earns average revenue of $40, has an

average total cost of $43 and an average variable cost of $36.

If the firm's marginal cost curve is equal to its average total cost curve at an output level of 25,000 units, how much loss does the

firm experience at its current level of output?

A. exactly $75,000

B. more than $75,000

C. less than $75,000

D. None of the above

10. Which of the following statements is (are) correct?

(x) A profit maximizing firm in a competitive market produces corn. Suppose the market price for corn is $4.00 per bushel. At the profit maximizing (loss minimizing) quantity of 50,000 bushels, the ATC is equal to $5.00 and the AFC is equal to $1.50. Given these conditions the firm will experience losses of $50,000 since price is less than average total cost but greater than average variable cost.

(y) A profit maximizing firm in a competitive market produces wooden chairs. The firm, which is a price-taker, faces a price of $50 for its product. Its average total cost is $57 and its average fixed cost is $9 at the quantity where marginal cost equals marginal revenue. In the short run, the firm will shut down and incur the total loss of its fixed costs.

(z) At the current level of output, a profit-maximizing firm in a competitive market earns average revenue of $35 and has an average total cost of $32. If the firm's marginal cost curve is equal to its average total cost curve at an output level of 50,000 units, then the firm would earn a profit of $150,000 at its current level of output.

A. (x), (y) and (z)

B. (x) and (y) only

C. (x) and (z) only

D. (y) and (z) only

E. (x) only

A monopolist with a constant marginal cost of production of 10 maximizes its profit by choosing to produce where the price elasticity of demand is –3. (Recall that MR = p(1 + 1/ε) where MR is marginal revenue, p is price and ε is the point price elasticity of demand.)

A. If price is decreased (from its profit maximizing level) by a small amount, revenue of the monopolist will increase.

B. If the monopolist’s fixed cost increases, its profit maximizing price also increases.

C. The price set by the monopolist is equal to 30.

D.Since marginal cost is constant, both profit-maximizing and revenue-maximizing quantities are equal.

Thank you for your help! (Please show process)

41. A monopolist has a constant marginal and average cost of $10 and faces a demand curve of QD = 1000 – 10P.
Marginal revenue is given by MR = 100 – 1/5Q.
a. Calculate the monopolist’s profit-maximizing quantity, price, and profit.
b. Now suppose that the monopolist fears entry, but thinks that other firms could produce the product at a cost of $14
per unit (constant marginal and average cost) and that many firms could potentially enter. How could the monopolist
attempt to deter entry and what would the monopolist’s quantity and profit be now?
c. Should the monopolist try to deter entry by setting a limit price?

In using the graph for a monopolist, with demand, marginal revenue, marginal cost, and average total cost curves, explain how you find the profit maximizing level of output. (Note that this question asks about OUTPUT. The next question asks about PRICE.)

On a graph, draw all the following

a. The average fixed cost curve (AFC)

b. The average total cost curve (ATC)

c. The average Variable cost curve (AVC)

d. The marginal cost curve (MC)

EXPLAIN THE REASONING BEHIND THE SHAPE AND LOCATION OF EACH CURVE

1. Use the data in the table and calculate the average costs and marginal cost.     

2. Discuss the nature of the Average total cost curve. Is it increasing or decreasing? Explain with reason.                                                                                                                         
3. What is the relation between Average total cost and marginal cost? Draw the typical shape of Average total cost (ATC) and Marginal cost (MC). When will the firm achieve maximum efficiency?                                                                                                         

Which of the following is true?

Select one:

a. The average variable cost curve intersects the marginal cost curve at the latter's minimum.

b. The marginal cost curve intersects the average total cost curve at the latter's minimum.

c. The marginal cost curve intersects the average fixed cost curve at the latter's minimum.

d. The average fixed cost curve graphs as a horizontal straight line.

e. The average fixed cost curve intersects the average variable and average total cost curves at their minimums.

A firm has a fixed cost of $20,000 in its first year of operation. When the firm produces 1,000 units of output, its total costs are $80,000. When it produces 1,100 units of output, its variable costs are $70,000. If the marginal cost of each of the 100 additional units of output is the same then the marginal cost of producing the 1,050th unit of output is less than $90.

True

false

The average variable cost curve and average total cost curve will eventually intersect as output increases because average fixed cost eventually becomes negative.

True

False

If marginal cost is rising, then it is likely that marginal product is decreasing because the additional input costs are spread over fewer units of output.

True

False

1. Derived demand refers to a demand connected to the final product’s

______________.

A. production cost

B. demand

C. production

D. design

2. The increase in output stemming from a one-unit increase in an input is referred to as marginal _________.

A. cost

B. revenue

C. physical product

D. physical input

3. Total output will increase until which of the following occurs?

A. Marginal cost is equal to marginal revenue.

B. Marginal cost is minimized.

C. Marginal physical product is equal to zero.

D. Marginal physical product is less than zero

4. As more inputs are added to fixed inputs, the result is described by the law of diminishing ______________.

A. returns

B. marginal costs

C. marginal inputs

D. marginal revenues