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Quiz5Answers - p. 142 in the textbook), consumer surplus is...

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Economics 20A Winter 2008 Quiz #5 Please answer both questions. Be sure to explain your answers. Good luck! 1. In the diagram below, show the area representing consumer surplus when the monopolist chooses the profit-maximizing output. ANSWER: The firm maximizes profits by producing the quantity where marginal revenue equals marginal cost, or at Q M . The corresponding price is P M . As we had learned previously (see, for example,
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Unformatted text preview: p. 142 in the textbook), consumer surplus is the area under the demand curve, above the price, and to the left of the quantity, or the shaded area below. 2. What is a natural monopoly? ANSWER: This is covered in the textbook, page 314. An industry is a natural monopoly when a single firm can supply a good or service to an entire market at a lower cost than could two or more firms....
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This note was uploaded on 02/02/2009 for the course ECON 62140 taught by Professor Ouyang during the Spring '08 term at UC Irvine.

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