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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 Subscribe To Get Solution