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Unformatted text preview: nomic profits = (MC – ATC)*Q.
If economic profits < 0 MC < ATC
If firm does not shut down, MC > AVC Use the following figure to answer question 32:
G F C
D H I
Q1 Q2 D
Quantity Q32. What is the redistribution of surplus from consumer to the producer under singleprice monopoly, as compared to perfect competition? a)
BEHD Solution: a) BEGC
In a perfectly competitive market, the equilibrium is at point F CS=AFC.
In a single-price monopoly, the equilibrium is at point E PS=BEHI.
The redistribution of surplus from consumer to the producer BEGC
Q33. Suppose a single-price monopoly makes no economic profit. If the monopoly sells
100 units and incurs $900 in variable costs and $400 in fixed costs, what is the
equilibrium price? a)
Cannot be determined with given information Solution: d) $13
TC = VC + FC = $900+ $400 = $1,300. Page 20 of 33 ©Prep101 www.prep101.com/freestuff ATC = TC / Q= $1300 / 100 = $13
Economic profit = (P - ATC) * Q = (P – 13)*100 =0 P= $13.
Economic profit =...
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This note was uploaded on 08/26/2010 for the course ECON 208 taught by Professor Dickenson during the Fall '07 term at McGill.
- Fall '07