Question

B CH FJ N G: K :0 "H:L R E MC ... ... D T Quantity IM MR S a. What is the profit maximizing quantity for this monopoly? 1 b. What is the Price the Monopoly will choose? B What would be the price under perfect competition? d. What would be the output level under perfect competition?

Answer 1

Answer

Figure -1

a.  From Figure -1, we see that the profit-maximizing quantity for this monopoly is 'I' units.

B FJ N G.K... 0 IC HOL R. E MC D T Quantity IM MR. S

b. The price, the monopoly will choose is 'B'.

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Figure - 2

c. From Figure -2, we see that under the perfect competition, the price would be 'E'.

B. CH F J N K.:0 CH:L E MC D T Quantity IM MR S

d. The output level under perfect competition would be 'S'.

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Figure - 3

Price А B C FJ N GINK.:0 HOL •R E MC .. S IM MR. T Quantity

From figure -3 , we see that the area represents deadweight loss is the area of the triangle 'FHR'

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Figure - 4

Price А B C FJ 6:.K.: 0 E H2 MC S...: S IM MR. T Quantity

From Figure - 4, we see that the consumer surplus in monopoly is the area of the triangle 'ABF'.

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Figure - 5

From Figure - 5, we see that the producer surplus for the monopoly is the area of the rectangle 'BFHE'.

Price А B C. FJ G.K.:0 HOL E •R MC .. S IM MR T Quantity

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Figure - 6

If MC = ATC, then ATC is 'E'. The monopoly price is 'B' and the monopoly output is 'I'. So, from the Figure-6, we see that the profit for this monopolist is the area of 'BFHE'.

Price А B. FJ N G.K.:0 C. .. HOL E •R MC .. S IM MR. T Quantity

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Figure - 7

If, ATC = C, then from Figure - 7, we see that the profit for this monopolist is the area of 'BFGC'.

Price А B C. FJ G.K.0 HEL E ....... MC ... S IM MR T Quantity

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