Problem Set 5

# Problem Set 5 - Problem Set 5 Suppose the DeBeers company...

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Problem Set 5 Suppose the DeBeers company exercises monopoly power in the distribution of diamonds. This year, the company earns economic profits and maximizes profit. This implies that the price of diamonds per carat will

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(a) exce ed the mar ginal cost of diam onds , but be equ al to the aver age cost of diam onds . (b) be equ al to the aver age cost of diam onds . (c) be equ al to the mar ginal cost of diam onds . (d)
The graph above shows the average cost, marginal cost, demand, and marginal revenue curves for a monopoly firm. The maximum possible profit the firm can earn per day is (a) \$24 0. (b) zero . (c) \$60. (d) \$12 0.

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selling computers in a given market. The computer industry is currently perfectly competitive and in equilibrium. Suppose all firms in the industry are taken over by a single firm that establishes a monopoly in the market. Assuming the monopoly maximizes profit,
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## This note was uploaded on 03/20/2008 for the course EC 205 taught by Professor Hymen during the Spring '08 term at N.C. State.

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Problem Set 5 - Problem Set 5 Suppose the DeBeers company...

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