Question

2.Based on the demand and cost data for a pure monopolist given in the table below, answer the following questions

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Output           0        1     2     3      4      5

Price ($)     1000 600 500 400 300 200

Total Cost     500 520 580 700 1000 1500

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a. Calculate the marginal revenue and marginal cost for this monopolist.

b. How many units of output will the profit-maximizing monopolist produce? At what price?

c. If this is a perfectly discriminating monopolist and he sells 4 units of this product, what is his total revenue?

3. Draw a graph according to the following descriptions, label all the curves you used and indicate the area of economic profit or loss.

a. a purely competitive firm in earning economic profits in the short run.

b. a natural monopoly

c. a monopolistically competitive firm experiencing economic losses in the short run.

d. a monopolistically competitive firm in long run equilibrium.

e. an oligopoly in which the members are behaving in collusion.

4 Assume that a purely competitive firm has the schedule of the average and marginal costs given in the table below

Answer 1

2) Page : Date : Q P($) TR=(PxQ) MRS STA O TC ATS 1000 - Soo 600 2 500 520 20 1ooo 400 B S80 60 4oolo2 1200 200 700 4 120 300 0 1 000 300 5 200 1000 - 200 1500 Soo b) A monopolist will produce at the output level where MC=MR (in order to max. probit) in this case it will produce (as at this level it's having 3 units of output 15 A MR which exceeds MC at max. output level). c) In the a perfect price discrimination producer knows willingness to pay of this will consumon's consumer charge each to their willingness to pay. each Sum In this case for calculating TR we take kumulative price of goods consumers charged exactly to their willingners pay to for each good. 1. TR (at Q = 4) test 600 +500 + 400 + 300 1800