Question

1. Assume that at a given level of output a monopoly firm has marginal revenue of $9, its ATC is $9, and marginal cost is $7. If this firm were to incrementally increase its output then A) profit will increase B) price will increase C) profit w decrease D) price will equal marginal revenue. 2. For a monopoly firm, if AVC = $20, P = $21, and ATC = $22, then the firm should: A) increase production. B) produce at the point where MC = MR. reduce production C) shut down D) 3. A monopolist sells 2,000 units for $20 each. Total costs of 2,000 units are $30,000. If the price falls to $19, the number of units sold increases to 2,100. Total costs of 2,100 units are $30,075. Total profits at the level of 2,000 units and a price of $20 is: A) $30,000. B) $20,000 C) $10,000 D) zero in the long run. 4. A very important difference between perfect competition and monopoly is A) the monopoly faces a downward-sloping demand curve, while the perfect competitor faces a horizontal demand curve. B) the monopoly faces an inelastic demand curve, while the perfect competitor faces an elastic demand curve. a monopoly is profitable, while a perfect competitor is only sometimes profitable C) a monopoly is not regulated by the market, while a perfect competitor is regulated D) by the market.

Answer 1

1. A monip.ly maximize profit at MR - Mc. Currently NR = 89 and Mc = $7. Mc will increase If fim increase its output MR will decrease and till the point MR and Mc gets egual. At NR me, the prefet will be maximum. B Therefore if this form were to - outfact, then Prift will increase mentally is reeds at its Answer option (A) Note : Increase in gronhty will decrease price fram i to pe :-> Hie #fel fons XLAYAVA8%und Arschen kad s rede production so that frice grese and the point is ab ALL. - (3 for a monopoly from, if Ave 20, 8-321 and Arc - $22 Price CATE Firm is making low becaux P < ATG and et egulibson because MR=MC Men Hence firm should Answer: option produce at (B). the point where MC=MR.

3 At 2000 units of urtput, porce is zo, total cust is $300m 3D009 TR = (Porce) (output) TR = (20) (200) IR = touro (Al 2000 inits of outbut) Te = $30000 (A7 2000 units of output) Profit : _TR-TC inkt = 40.000 - 3oove Prefet - $lomme Leandwex cphen (6) 6. A very important differcoce between perfect competitin and munpuly is the menuptly faces a downword - sloping demand curve, while the perfect compettior faces a horizontal domand Curve. Price t (Perfect Competton) Priua (Monopoly) oy Chlweri yohum (4)