Homework Answers
a) Output = 300
b) MC = 2
c) TC=ATC*Q = 6.3*300 = 1890
d) P = 5
TR = P*Q = 5*300 = 1500
e) Loss = P-ATC*Q
(5-6.3)*300 = -1885
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1. Answer the following questions:
a. Why is the demand curve for a monopolist downward-sloping,
while the demand curve for the perfectly competitive firm is
horizontal?
b. Suppose a perfectly competitive industry is suddenly
transformed to a monopoly industry. What will happen to price,
output, consumer and producer surplus, and deadweight loss?
c. If the wireless phone industry is dominated by four large
firms, each with 20% of market share, and 2 small firms, each with
10% market share, what...
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