Question

8. In a market with a monopoly that faces direct demand Q(P) = a - bP, and cost function c(Q) dQ - eQ? then the firm's marginal revenue function is a. b b C. MCS MR -MCP b. a- a-2bQ d. none of the above 9. The figure to the right shows the market with a negative externality. The competitive equilibrium quantity is a. A b. B c. C d. D 10. The figure to the right shows the market with a negative externality. The monopoly equilibrium quantity is a. A b. B c. C d. D 11. A pure public good is a. A good that the public must pay for b. Non rival in consumption and non excludable c. More costly than a private good d. Paid for by the government. PIQ) AB C D Q

Answer 1

Answer-8. Correct option is 'd'

Given,    P = a - bP

Total Revenue (TR) =     P * Q

                              =    (a - bP) Q

                              =   aQ - bPQ

Marginal Revenue (MR)    =    dTR / dQ

                                      =   aQ - bPQ / dQ

                                      = a - bP

Marginal Revenue (MR) is a - bP.

Answer-9. Correct option is 'a'

A negative externality exists when the cost to society of an economic agent's action is greater than the cost to the agent. The competitive equilibrium quantity is A, where MR = MC_s. Competitive equilibrium is a condition in which profit-maximizing producers and utility-maximizing consumers in competitive markets with freely determined prices arrive at an equilibrium price. At this equilibrium price, the quantity supplied is equal to the quantity demanded.

Answer-10. Correct option is 'b'

The monopoly equilibrium quantity is B, where the marginal revenue is equals to the marginal cost (MR = MC_p). The competitive equilibrium condition is that the marginal cost is equal to the marginal revenue and the MC cuts the MR curve from below.

Answer-11. Correct option is 'b'

A pure public good is non-rival in consumption and non excludable. This means that individuals cannot be effectively excluded from its use and use by one individual does not reduce its avalibility to others. Pure public goods are those that are perfectly non-rivalrous in consumption and non-excludable.