Question

2. Use the following graph to answer the following questions: P/ MC ATC /AVC MR 20 2528 50 a. What price is charged by the monopol order to maximize profits? b. Calculate the total revenue accruing to the mo- nopolist at the profit-maximizing output. C. Calculate the total cost to the monopolist at the profit-maximizing output. d. Calculate the profit for the monopolist. e. Calculate the total variable and fixed costs of the monopolist at the profit-maximizing output. Now assume the MC curve represents mar- ket supply for a perfectly competitive market. What would the equilibrium price and quan- tity be for perfect competition? Are consumers better off or worse off with perfect competition or monopoly? f.

help. agricultural economic

Answer 1

2.

A

For profit maximization,

Price = 20

B.

Total revenue accrued = Price*output =20*20

Total revenue accrued = 400

C.

Total cost = ATC*output = 15*20

Total cost = 300

D.

Profit = total revenue - total cost = 400-300

Profit = 100

E.

Total variable cost = 12*20 = 240

Total fixed cost = total cost - total variable cost = 300-240

Total fixed cost = 60

F.

Price = 16

Output = 28

Consumers are better off with perfect competition, because there is more output and lower price in the market and there are allocative and productive efficiency in the market.