Question

Question 32 5 pts A monopolistic competitor has the following information on cost and demand. Quantity Price ($) Total Marginal Total Marginal Average Revenue Revenue Cost ($) Cost($) Cost(s) ($) ($) 30 35 45 60 77 0 2 4 6 8 10 12 14 16 18 20 25 24 23 22 21 20 19 18 17 16 15 0 48 92 132 168 200 228 252 272 288 300 25 23 21 19 17 15 13 11 9 7 5 100 2.5 5 7.5 85 115 13 19.5 225 25 30 175 11.25 10 9.63 10 10.5 11.79 13.13 14.44 16 126 165 210 260 320 What will the firm's profits equal in the long run? o $0 o $91 o $102 o $228

Answer 1

(32) (A)

In long run, for a monopolistic competitor, MR = MC and P = ATC, so Profit = 0

(40) (A)

With collusion, both firms will maximize their individual and joint profit which is highest at cell A for both (= $20 each).

(41)  (B)

If Beta charges High, Alpha's best strategy is to charge Low since payoff is higher ($30 > $20).