The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and...

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The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for a monop

business economics

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Answer 1

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Answer #1

PRICE AND COST (O ) QUANTITY Monopoly Outcome

Procedure to obtain profit/loss graphically:

1. Draw a vertical line from the point of intersection of MR and MC curves

2. Extend this vertical line such that it touches the x-axis, Demand curve and the ATC curve

3. Its x-intercept is the profit-maximizing (loss-minimizing) quantity

4. From the points of intersection of this vertical line and the Demand curve and the ATC curve, draw a horizontali line extending up to the y-axis

5. The area under the horizontal line from the ATC curve is the Total Cost

6. The area under the horizontal line from the demand curve is the Total Revenue

7. If the total cost is greater than the total revenue, then the difference in the area is the loss. If the total cost is less than the total revenue, then the difference in the area is the profit.

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Answer 2

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Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for BYOB.

BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville.

BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville.

BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville.

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Homework Answers

Add Answer to: The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and...

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The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and...