Pure%20Monopoly[1]

# Pure%20Monopoly[1] - Pure Monopoly The table below gives...

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Pure Monopoly The table below gives the demand and cost data for a monopoly, in dollars. Answer the next questions on the basis of this information. Price Marginal Average Marginal Output (ave. revenue) Revenue Total cost Cost 0 1,750 1 1,600 1,600 2,400 2,400 2 1,450 1,300 1,500 600 3 1,300 1,000 1,167 500 4 1,150 700 1,050 700 5 1,000 400 1,000 800 6 850 100 975 850 Assume that the goal of this firm is to maximize total profits. The firm would produce ____ units of output and realize a profit totaling _____. a. 2 units, \$300 b. 3 units, \$600 *c. 4 units, \$400 d. 5 units, \$200 Instead assum e that this firm is a “nonprofit” that attempts to maximize output subject to the constraint that its revenue covers its full cost that is, AFC plus AVC. The firm would operate at a. 3 units of output b. 4 units of output *c. 5 units of output d. 6 units of output Given identical cost conditions, a monologist is likely to charge a *a. Higher price and earn higher profits than a competitive firm b. Higher price and earn lower profits than a competitive firm c. Lower price and earn higher profits than a competitive firm d. Lower price and earn lower profits than a competitive firm If a monopolist produces at that output level where marginal cost exceeds marginal revenue, to maximize profits the firm should a. Increase output and increase price *b. Decrease output and increase price c. Increase output and decrease price d. Decrease output and decrease price

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Answer the following question on the basis of the figure below If the monopoly maximizes profit, total profit will equal a. \$950 b. \$1,150 *c. \$1,350 d. \$1,550 In the short run, a monopolist could: a. Break even b. Incur a loss c. Make a profit *d. Any of the above If the monopolist incurs losses in the short run, then in the long run: a. It will go out of business b. It will stay in business c. It will break even *d. Any of the above is possible
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## This note was uploaded on 12/03/2011 for the course ECON 101 taught by Professor Flah during the Spring '10 term at Punjab Engineering College.

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Pure%20Monopoly[1] - Pure Monopoly The table below gives...

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