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ch9 - Chapter 9 Monopoly Oligopoly and Monopolistic...

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Chapter 9: Monopoly, Oligopoly, and Monopolistic Competition Wednesday, July 14

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QUESTION 1 (quantity supplied) Suppose that every firm in a given market has the same cost structure, described as follows: MC = 20 + .5Q VC = 20Q + .25Q 2 FC = 900 TC = 900 + 20Q + .25Q 2 If the market price is 60 , then how many units will each firm choose to supply? A) 60 B) 70 C) 80 D) 90 E) 100
answer to question 1 Suppose that every firm in a given market has the same cost structure, described as follows: MC = 20 + .5Q VC = 20Q + .25Q 2 FC = 900 TC = 900 + 20Q + .25Q 2 If the market price is 60 , then how many units will each firm choose to supply? 20 + .5Q = 60 .5Q = 40 Q = 80 A) 60 B) 70 C) 80 D) 90 E) 100

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QUESTION 2 (profits) Suppose that every firm in a given market has the same cost structure, described as follows: MC = 20 + .5Q VC = 20Q + .25Q 2 FC = 900 TC = 900 + 20Q + .25Q 2 The market price is 60 , so each firm chooses to produce 80 units. How much profit does each firm get? A) 600 B) 700 C) 800 D) 900 E) 1000
answer to question 2 Suppose that every firm in a given market has the same cost structure, described as follows: MC = 20 + .5Q VC = 20Q + .25Q 2 FC = 900 TC = 900 + 20Q + .25Q 2 The market price is 60 , so each firm chooses to produce 80 units. How much profit does each firm get? Π = P × Q TC Π = 60 × 80 [900 + 20(80) + .25(80) 2 ] Π = 4800 – 4100 Π = 700 A) 600 B) 700 C) 800 D) 900 E) 1000

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answer to question 2, continued Suppose that every firm in a given market has the same cost structure, described as follows: MC = 20 + .5Q VC = 20Q + .25Q 2 FC = 900 TC = 900 + 20Q + .25Q 2 P = 60 PS = (.5)(80)(40) PS = 1600 Π = PS – FC Π = 1600 – 900 Π = 700
QUESTION 3 (average total cost) Suppose that every firm in a given market has the same cost structure, described as follows: MC = 20 + .5Q VC = 20Q + .25Q 2 FC = 900 TC = 900 + 20Q + .25Q 2 P = 60 Q S = 80 Which is the correct average total cost function? A) 20/Q + .5 B) 20Q + .5Q 2 C) 900/Q + 20 + .25Q D) 880 + 19.5Q + .25Q 2 E) 900 + 20 + .5Q

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answer to question 3 Suppose that every firm in a given market has the same cost structure, described as follows: MC = 20 + .5Q VC = 20Q + .25Q 2 FC = 900 TC = 900 + 20Q + .25Q 2 P = 60 Q S = 80 ATC = 900/Q + 20 + .25Q
TYPES OF IMPERFECT COMPETITION 1. Monopoly: Only one seller 2. Oligopoly: Only a few sellers 3. Monopolistic competition: Many sellers, but each with some product differentiation.

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TYPES OF IMPERFECT COMPETITION: TABLE # of firms product differen- tiated?
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ch9 - Chapter 9 Monopoly Oligopoly and Monopolistic...

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