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Prep101comfreestuff economic profits mc atcq if

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Unformatted text preview: nomic profits = (MC – ATC)*Q. If economic profits &lt; 0 MC &lt; ATC If firm does not shut down, MC &gt; AVC Use the following figure to answer question 32: Price A B MC E G F C D H I MR 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) b) c) d) e) BEGC BEHI CGHD BEFC 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) b) c) d) e) \$9 \$4 \$5 \$13 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. OR 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.

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