Ch.11 HW - Anthony Marsala Professor Woodbury EC251H Sec. 2...

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Anthony Marsala Professor Woodbury EC251H Sec. 2 Ch. 11 Homework Pg. 384 #2, 5, 7, 11, 13, 14, 17, 34 2. A monopoly is unlikely to be profitable in the long run when it produces a quantity where demand is inelastic. At this range of prices, average cost exceeds the price paid by consumers. Since profit is measured by p – AC the firm is making a negative profit, or a loss. 5. If a monopolistic firm is operating in the elastic portion of its demand curve it is indeed making a profit, so this is a relevant test. However, it only maximizes its profit when MR = MC. If a baseball club wants to maximize revenue, its demand will be perfectly elastic. 7. A monopoly will set its price equal to its marginal cost when the government sets an optimal price regulation, or price ceiling, which forces the monopoly to charge no more than the competitive price. 11. A government profit tax will have no effect on the profit maximizing behavior of the casinos. The firm will still want to maximize its after tax profit, which is now (1 –
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Ch.11 HW - Anthony Marsala Professor Woodbury EC251H Sec. 2...

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