Question

6.) The graph below illustrates the demand curve as well as the a monopoly. In this graph, Ptarket represents inverse dema represents the equilibrium quantity and price in a monopoly while QWomopay and Pifonopoly r blue book, illustrate and answer the following: In your own graph, drawn in you A. ) Illustrate the necessary curves used to determine the equilibrium quantity and price for a monopoly B.) Illustrate the equilibrium quantity and price as if the firm was perfectly competitive C. Do equilibrium prices differ between a monopoly and perfectly competitive explain why or why not. pMonopoly PMarket poly 7.) The graph below illustrates a Cournot Oligopoly where there are two firms. Each firm, Firm1 and Firm 2, produces an output quantity according to its own reaction function, which is shown as: Firm I's Reaction Punction, r(Q) Q Firm 2's Reaction Function, r2(Q): Q22g The graph highlights each firm's reaction function and the Cournot equilibrium, where Q1 -15 and Q 15. In your own graph, drawn in your blue book, illustrate how an increase in the marginal cost for Firm 1 will impact each firm's output quantity (Q & Q). Briefly explain! Hint: Make sure to illustrate all necessa ry changes to the firm's reaction function. ← Firm 1 : r1 (Q1) Cournot Egilibrim 15 Firm 2: Q) 15

Answer 1

6)curve in monopoly

Monopolies can maintain super-normal profits in the long run

TI AC 1 Supen AR MR

price is set above MC and firms earns economic profit, equilibrium price and quantity

B) in perfect competition is equilibrium price and quantity

Ouen ti

C) In a perfectly competitive market, Price =marginal cost and firms earn an economic profit of zero

In a monopoly, the price is set above marginal cost and the firm earns economic profit (price is greater than average cost)

Under perfect Competition market equilibrium is possible only when MR = MC and MC cuts the MR curve from below

In monopoly, equilibrium whether marginal cost is constant, falling or rising