Question

8:52 Blackboard Question 1 (10 Marks) The following graph represents the situation of Sinda competitive caps industry cap a fim singaps in the perfectly GO10 1) How much output should Sindhad produce to maximize this profit, if the market price is cu to SUIT marks) 2) How much profit loss) will he can? (2 marks) 3) Indicate the profit(los) are on the graph marks) 4) Find the fined cool paid by the firm. (2 marks) Suppose Sindbad decides to shut down. What would be low he marks) Question 2 (20 Marks) The figure below shows the demand and cost curves for a monopolist. Assume there were coses in the market and an unlimited number of units of the product can be produced t r acto 55 per unit. As a result average a n d marginal cost are the same 1) Find the output level and the price charged to come, when the monopolis miming its orir 6 marks) 2) Find the moepoly's when it is im p rimar 3) Indicate theme of comme surplus under m y marks) 4) What would be the market price and the market quantity of the industry in the futwa perfectly competitive (Assuming a constant cost industry marks) 5) Indicate the area of consumer surplus when the market is served by perfectly competitive 6) What is the area of the deadweight loss from monopoly marks

Answer 1

Answer 1.

1. Perfectly competitive firm produces where P=MC= $11

When Q=100, P=MC=$11.

2. When P=$11, ATC=$9, Q=100

Profit= (P-ATC)*Q= (11-9)*100=$200

3. profit is the rectangular area below the P above ATC, till Q.

4. AFC=ATC-AVC= $9-$6=$3

Total fixed cost= AFC*Q=$3*100=$300

Total fixed cost=$300

5. When the firm shuts down, the variable cost are zero. So the total loss is of fixed cost as they have already been incurred.

In this case, loss= TFC=$300

Note-According to HOMEWORKLIB RULES first question can be answered.