lab 8 - Econ 203 lab 8 Page 1 November 22-26, 2010...

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Econ 203 lab 8 Page 1 November 22-26, 2010 Economics 203: Intermediate Microeconomics I Lab Exercise #8: Monopoly Section 1: Test Your Understanding True or False? 1) When an industry is a natural monopoly, the public often insists that its behaviour be regulated by the government. 2) If the demand curve is horizontal, marginal revenue equals price 3) For monopolists, but not perfect competitors, setting marginal revenue equal to marginal cost maximizes profit. Section 2: Discussion: Compare the long-run equilibrium of a perfectly competitive industry with that which would occur if all the firms were to be merged in a single monopolistic firm. Is there any reason for society to prefer one equilibrium over the other? Section 2: Applications 1) Suppose that a monopolist’s demand curve is as follows: 8 1000 7 2000 6 3000 5 4000 4 5000 3 6000 2 7000 1 8000 a) What is the firm’s marginal revenue when output is between 7 and 8 units? b) What is the firm’s marginal revenue when output is between 1 and 2 units?
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lab 8 - Econ 203 lab 8 Page 1 November 22-26, 2010...

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