problem14S06key

problem14S06key - Homework Problem Set#14 E303 Davis Spring...

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Homework Problem Set #14 KEY E303 Davis, Spring 2006 1. Monopoly Pricing. A Graphical Analysis. The two panel graph below illustrates the relation between market forces and optimizing decisions for a firm in the canned peaches market, a competitive industry. a. In the rightmost panel illustrate the optimal output, price and profit levels for the competitive firm. P P c S D MC ATC P* π c =0 Market Q Firm Q* Q b. Suppose that due to concerns regarding the paucity of domestic peach producers the government gives to USAPeaches Inc. an exclusive right to domestically produce and sell canned peaches. Circle the components in the competitive chart that you would use to generate predictions for the monopolist. c. In the coordinate axis below, identify the optimal monopoly output, monopoly price and monopoly profits. Compare these predictions to the price and profit conditions for the firm as a competitor that you developed in part a..
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