Chap15.docx - 1 Sheymi Hernandez Mr Puga ECON2025 19 April 2017 Assignment 3 Chapter 13-15 2 PR 1 1 The table below gives the cost and revenue data for

Chap15.docx - 1 Sheymi Hernandez Mr Puga ECON2025 19 April...

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1 Sheymi Hernandez Mr. Puga ECON2025 19 April 2017 Assignment 3: Chapter 13-15
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2 PR 1 1. The table below gives the cost and revenue data for a monopoly firm. Output Price TR (P * Q) MR TC ATC (TC/Q) MC ΔTC/ΔQ 1 16 16 * 1 = 16 16 20 20/1 = 20 20 2 15 15 * 2 = 30 14 30 30/2 = 15 10 (30 – 20) 3 14 14 * 3 = 42 12 36 36/3 = 12 6 (36 – 30) 4 13 13 * 4 = 52 10 42 42/4 = 10.5 6 (42 – 36) 5 12 12 * 5 = 60 8 50 50/5 = 10 8 (50 – 42) 6 11 11 * 6 = 66 6 63 63/6 = 10.5 13 (50 – 63) 7 10 10 * 7 = 70 4 84 84/7 = 12 21 (84 – 63) a. Complete the table. b. What is the output where the firm’s profits will be at a maximum? At output 5 the firm’s profits will be at a maximum. c. Calculate the total profit/loss of this firm? Profit/loss = TR – TC $60 – $50 = $10 (Profit) d. Can the profit/loss situation in © remain in the long run? Explain fully. In the long run, the demand curve of a firm in a monopolistic competitive market will shift so that it is tangent to the firm’s ATC curve. As a result, this will make it impossible for the firm to make economic profit; it will only be able to break even. Note: firms enter creating substitutes
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