Monopoly%20and%20Profit%20Maximization

Monopoly%20and%20Profit%20Maximization - If not why not If...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Monopoly and Profit Maximization Class Exercise Econ 419 – Maymester 2010 Consider the following market structure and costs. ABC Widget Company has a monopoly in this market. Demand for its product, as well as its costs, are shown below. 1. Draw the Marginal Revenue Curve consistent with the Demand (Average Revenue) Schedule confronting ABC Widget. 2. To maximize profits, ABC Widget Company will produce ________ widgets each production period, and set its price equal to _________dollars per widget. At this level of production, its Average Total Cost of production equals ________dollars per widget. Thus its economic profit per widget produced and sold equals _______dollars per widget. 3. ABC Widgets earns economic profits of _________dollars per period. Would you expect other firms to try to enter this market?
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: If not, why not? If so, how can ABC Widget company keep them out (and keep its monopoly position)? P ATC MC Q AVC D 1000 2000 3000 4000 $10.00 $20.00 $30.00 Suppose Demand for Widgets falls to the level shown in the graph below (where, again, we also show ABC Widget Companys relevant per unit costs): 4. At this level of Demand, we would expect in the short run ABC Widget to produce ______________widgets per production period, and to set its price equal to __________dollars per widget. Economic profits for ABC Widget Company will equal __________dollars per period. 5. If Minimum Efficient Scale in production for ABC equals 2600 widgets per production period, what might we expect ABC Widget Company to do in the long run? P ATC MC Q AVC D 1000 2000 3000 4000 $10.00 $20.00 $30.00...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern