hw 8

Advertising by monopolistically competitive firms can do all of the following EXCEPT

lower the price of a good

If a retail food chain merged with a meat packing company, this would be an example of a

vertical merger

A single-price monopolist can sell 7 units at price of $30 per unit and 8 units at a price of $25 per unit. The marginal revenue of the 8th unit is $______.

-10

Numerical fill in the blank question: Suppose a perfectly competitive firm has the marginal cost function of MC = 3Q. The market price is given by P = $45. How many units of output will the firm produce?

15

Suppose the (inverse) demand function for a single-price monopoly is P = 520 - 2Q. This means that the marginal revenue function for the monopolist is MR = 520 - 4Q. Assume the marginal cost function is given by MC = 4Q. Find the price that the monopolist will charge. Hint: You'll first have to find the quantity and then plug this into the demand function to find the price.

390

Numerical fill in the blank question: Suppose that at this same firm's profit-maximizing level of output, average costs are ATC = $39. What are the firm's total profits earned?

90

Which of the following is NOT an example of price discrimination?

A burger restaurant charges a higher price for a large adult burger than a kid's meal burger

Which of the following conditions hold true for both the perfectly competitive firm and the monopoly at the profit-maximizing output level?

MR=MC

In a long-run monopolistically competitive equilibrium,

P = ATC, and ATC is not at its minimum value

Now find the P* price that the monopolist will charge. This is found by finding the height of the demand curve (willingness to pay) at the Q* quantity you found in the previous question.

P*=250

For a perfectly competitive firm, the short-run break-even point occurs at the level of output where

P=MC=ATC

Which of the following is true of the price charged by a monopolistically competitive firm at the profit-maximizing level of output?

P>MC

Suppose the (inverse) demand function for a single-price monopoly is P = 350 - 2Q. This means that the marginal revenue function for the monopolist is MR = 350 - 4Q. Assume the marginal cost function is given by MC = 3Q. These functions are pictured above in Graph 2. Find the Q* that the monopoly will produce. Hint: Q* is found be setting MR = MC.

Q*=50

In the long run equilibrium, a monopolistic competitor will produce to the point at which

actual average total costs are higher than the minimum of possible ATC

Which of the following is NOT a characteristic of monopolistic competition?

barriers to entry

a cartel is a form of

collusion

cartels

combinations of corporations that control an entire industry

when considering perfect competition, the absence of entry barriers implies that

firms can enter and leave the industry without serious impediments

The demand curve for the product of a monopolistically competitive firm

is downward sloping and relatively elastic

The firm in a perfectly competitive industry is a

price taker

One problem associated with a monopoly firm is that it

restricts output and charges a relatively higher price than a purely competitive industry

collusion

secret agreement or cooperation; firms cooperate instead of compete (illegal)

A horizontal merger involves

the joining of two firms selling similar products

When comparing perfect competition and monopoly, a major assumption made is that

the marginal costs of production are the same under monopoly as under perfect competition