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In the following table are cost and demand data for a pure monopolist Quantity demanded Price Marginal revenue Average cost Marginal cost

In the following table are cost and demand data for a pure monopolist.

Quantity demanded

 

Price

Marginal revenue

Average cost

Marginal cost

0

$17.50

 

 

 

1

16.00

$16.00

$24.00

$24.00

2

14.50

13.00

15.00

6.00

3

13.00

10.00

11.67

5.00

4

11.50

7.00

10.50

7.00

5

10.00

4.00

10.00

8.00

6

8.50

1.00

9.75

8.50

7

7.00

"?o2.00

9.64

9.00

8

5.50

"?o5.00

9.34

9.25

9

4.00

"?o8.00

9.36

9.50

 

a. An unregulated monopolist would produce _________ units of this product, sell it at a price of $__________, and receive a total profit of $__________.

b. If this monopolist were regulated and the maximum price it could charge were set equal to marginal cost, it would produce __________ units of a product, sell it at a price of $___________, and receive a total profit of $________________. Such regulation would either _____________ the firm or require that the regulating (bankrupt, subsidize) government _____________ the firm.

c. If the monopolist were regulated and allowed to charge a fair-return price, it would produce __________ units of product, charge a price of $__________, and receive a profit of $__________.

d. From which situation"??a, b, or c"??does the most efficient allocation of resources result? ____________ From which situation does the least efficient allocation result? ____________ In practice, government would probably select situation _____.

 

2. Identify whether the following long-run conditions apply to a firm under pure monopoly (M), pure competition (C), or both. Put the appropriate letter(s) (M or C) next to the condition.

a. There is the potential for long-run profits because price is greater than or equal to average total cost. _______

b. The firm's demand curve is perfectly elastic. _______

c. The firm maximizes profits at the output level where MC = MR.

_______

d. The firm exhibits productive efficiency because price is equal to the minimum average total cost. _______

e. Price is greater than marginal revenue for each output level except the first. _______

f. There is an optimal allocation of resources because price is equal to marginal cost. _______

May 01 2020 View more View Less

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