Microeconomics Chapter 9

Use the graph below to calculate this monopolist's profit. Picture of Graph on phone 04/07 @6:10pm

$15.75 Total revenue = price x quantity TR= $38 x 2.25= $85.50 Total cost = Average cost x Quantity TC = $31 x 2.25 = $69.75 Profit= total revenue - total cost $85.5-$69.75 = $15.75

Picture of Graph on phone 04/07 @6:29pm

$1200 Totalrevenue=Price×Quantity Given that this monopolist is producing at the profit-maximizing level, where MR=MC and P=$130 and Q=15, TR=$130×15=$1950 For total cost, Totalcost=Averagecost×Quantity From the average cost curve on the graph, we can see that at Q=15, AC=$50. TC=$50×15=$750 Finally, we can calculate profit, Profit=Totalrevenue−Totalcost π=$1950−$750=$1200

How much profit is this monopolist earning? You may use this formula when solving the question: Profit = Total Revenue − Total Cost Picture of Graph on phone 04/07 @6:18pm

$2350 TR=$800×5=$4000 For total cost, Totalcost=Averagecost×Quantity From the average cost curve on the graph, we can see that at Q=5, AC=$330. TC=$330×5=$1650 Finally, we can calculate profit, Profit=Totalrevenue−Totalcost π=$4000−$1650=$2350

Using the following table, identify monopolist Econislife's profit-maximizing price. Picture of Graph on phone 04/07 @4:51pm

$600 The demand price of $600 has the same marginal revenue and marginal cost.

JRM is a monopolist in the market for a new drug, Econbrilliance. Using the graph below, determine what JRM's profit-maximizing price for Econbrilliance will be. Picture of Graph on phone 04/07 @6:40pm

$8,000

Use the graph below to help determine the profit-maximizing price this monopolist will charge for their newest product? Picture of Graph @6:53pm 04/07

$800 Reason: First, the monopoly chooses the profit-maximizing level of output by choosing the quantity where MR=MC. On this graph, this happens at Q=5. Next, the monopoly decides how much to charge at this output level by drawing a line straight up to its perceived demand curve. Thus, this monopoly will charge a price of $800.

The rule of profit maximization in a world of perfect competition is for each firm to produce the quantity of output where P = MC. The allocative inefficiency of a monopoly violates this rule. Who does it affect? Select the correct answer below: A. It affects society as a whole. Minimally, it affects consumers because there will be a lower quantity of these goods in the market at higher monopoly prices. Moreover, it stifles innovation that is brought on by competitors because monopolies do not need to please their customers. B. It affects special interest groups only. Monopoly prices separate the consumers into groups. Those who need the product and are willing to pay for it and those who do not. C. Monopoly allocative inefficiency does not affect the consumer, rather is beneficial for providing the product. Without the monopoly producing the product, it would not be available at all. D. Monopoly allocative inefficiency affects only the wealthy. The idea is for the monopolist to make the product available at a less expensive price, where P<MC. More people can now buy the product and this inspires technological innovation.

A Reason: They are the only supplier in the market. If you don't purchase the product from the monopolist, you don't buy it at all. With giant barriers to entry other firms can't compete for a better product.

What do economists say is problematic with the allocative efficiency of a monopoly? A. Consumers will suffer from a monopoly because it will sell a lower quantity in the market at a higher price compared to a firm in a perfectly competitive market. B. Monopolies are not inefficient. They produce the optimal quantity of some output; the quantity where the marginal benefit to society of one more unit just equals the marginal cost. C. Companies can offer a wide range of services at low prices and they have to fight to keep monopoly power in a competitive market with low barriers to entry. D. Consumers will suffer from a monopoly because it will sell a higher quantity in the market at a lower price compared to a firm in a perfectly competitive market.

A. Consumers will suffer from a monopoly because it will sell a lower quantity in the market at a higher price compared to a firm in a perfectly competitive market.

Which of the following statements is false? A. Allocatively efficient firms produce at a quantity for which P=MC. B. Allocative efficiency strives for efficiency at the societal level. C. Allocatively efficient firms are typically monopolists, whereas perfectly competitive firms are allocatively inefficient. D. Allocative efficiency encourages competition among companies to inspire a wide range of innovation.

Allocatively efficient firms are typically monopolists, whereas perfectly competitive firms are allocatively inefficient.

What does the perceived demand curve for a monopolistic competitor look like? A. It is flat B. It slopes downward. C. It is vertical. D. It slopes upward.

B. It slopes downward.

Looking at the table, explain why HealthPil's profit-maximizing price is $800. (HealthPill is a monopoly.) A.Marginal revenue is greater than average cost. B. Marginal revenue is equal to marginal cost. C. Marginal cost is greater than the price (P) at perceived demand. D. Perceived demand price (P) is greater than marginal revenue. Picture of Graph on phone 04/07 @5:42pm

B. Marginal revenue is equal to marginal cost.

In 1935, economics Nobel Prize winner John Hicks made a comment about the allocative inefficiency of monopolies. What did he mean when he said, "The best of all monopoly profits is a quiet life"? A. Monopolies donate their profits to society trying to please their customers. The problem of inefficiency for monopolies often runs even deeper and involves becoming efficient over a longer period of time. B. Monopolies may bank their profits and slack off on trying to please their customers. The problem of inefficiency for monopolies often runs even deeper and involves inefficiency over a longer period of time. C. Monopolies may bank their profits and provide their customer new innovations. The problem of inefficiency for monopolies often means new technology and a fast paced changing world. D. Monopolies may split their profits with their customers. The problem of inefficiency for monopolies often involves bureaucracy and wastes time.

B. Monopolies may bank their profits and slack off on trying to please their customers. The problem of inefficiency for monopolies often runs even deeper and involves inefficiency over a longer period of time.

Average profit, or profit divided by quantity, is also known as ________. A. total profit B. profit margin C. revenue margin D. complete profit

B. Profit margin

In the graph below, what does the shaded area represent? A. economic loss B. economic profit C. deadweight loss D. consumer surplus Picture of Graph on phone 04/07 @6:15pm

B. economic profit

On this production graph for a monopolist, what does the shaded area represent? A. total cost B. total revenue C. profit D. demand Picture of Graph on phone 04/07 @5:54pm

C. Profit

Given the profit schedule in the table below, what must marginal cost at Q=4 equal to be this monopoly's profit-maximizing point? Picture of Graph on phone 04/07 @5:17pm

MC = $125

This table displays the demand schedule for a product produced by a monopolist. What is the marginal revenue of the 10th unit? Remember to include a negative sign in your answer if necessary. Hint: Total Revenue=Price×Quantity Picture of Graph on phone 04/07 @2:30pm

MR= -$16

Using the table below, determine the profit-maximizing output (Q) for a monopolist. Picture of Graph on phone 04/07 @4:46pm

Q=6 Determine profit-maximizing output when MR=MC

Using the table below, calculate the total profit (π) for this monopoly at output level Q=5. Picture of Graph on phone 04/07 @2:44pm

π= $1700