hw3 ans - The Colorado College Department of Economics and...

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The Colorado College Department of Economics and Business Block 5 Econ 151 Homework # 3 answers. 1. (a) (i) Price Quantity TR MR TC Profit 24 10,000 $240,000 ---- $50,000 $190,000 22 20,000 440,000 $20 100,000 340,000 20 30,000 600,000 16 150,000 450,000 18 40,000 720,000 12 200,000 520,000 16 50,000 800,000 8 250,000 550,000 14 60,000 840,000 4 300,000 540,000 (ii) Profits are maximized at a price of $16 and quantity of 50,000. At that point, profit is $550,000. (b) (i) Natural monopoly: A monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. The average cost curve of a natural monopoly is downward sloping: (ii) When a monopolist reduce price to increase production by one unit, it reduces the price it charges for every unit it sells, and this cut in prices reduces the revenue on all the units it was already selling. So, a monopoly’s MR is less than price. 2. (a) The deadweight loss is shown by the triangle in the following figure:
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This homework help was uploaded on 04/19/2008 for the course EC 151 taught by Professor Ghosh during the Spring '08 term at Colorado College.

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hw3 ans - The Colorado College Department of Economics and...

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