At the profit-maximizing level of output, the firm will realize: A. Willie will continue to earn a positive economic profit, because entry will not affect the price of bipods In the monopoly market structure, new firms a. Thus, total revenue for a monopolist will start low, rise, and then decline. If the marginal revenue exceeds the marginal cost, then the firm should produce the extra unit. This firm will maximize its profit by producing: A.
A wide range of payment plans was offered, as well. In the diagram, the range of diminishing marginal returns is: a. E units and charge price C. The copper, aluminum, cement, and industrial alcohol industries are examples of: a. Rent paid for the use of equipment owned by the Schultz Machinery Company.
In a purely competitive industry: a. In this example, maximum profit occurs at 4 units of output. C producing Q3 units and charging a price of P3. Second, all the previous units, which could have been sold at the higher price, now sell for less. C B price equals marginal cost, resulting in allocative efficiency. The flat shape means that the firm can sell either a low quantity Ql or a high quantity Qh at exactly the same price P. Key Concepts and Summary A monopolist is not a price taker, because when it decides what quantity to produce, it also determines the market price.
The items can be bought by people in the low-price group and transferred to members of the high-price group. This price is above the average cost curve, which shows that the firm is earning profits. At its profit-maximizing output, this firm's total profit will be: A. Both purely competitive and monopolistic firms are price makers. A monopolist always produces on the inelastic portion of the market demand curve. The analysis of monopoly indicates that the monopolist A.
The marginal revenue of a firm is also calculated by taking the first derivative of the total revenue equation. The firm will charge the lower price in the market segment where consumers a. It must be impossible for one buyer to resell to another. B In seeking the profit-maximizing output the pure monopolist underallocates resources to its production. For an imperfectly competitive firm: A total revenue is a straight, upsloping line because a firm's sales are independent of product price.
Marginal revenue is less than price therefore the firm should consider raising its price until marginal revenue equals demand c. This equilibrium price is determined by finding the profit maximizing level of output—where marginal revenue equals marginal cost point c —and then looking at the demand curve to find the price at which the profit maximizing level of output will be demanded. All our writers are professionals in their respective fields thus ensuring all papers delivered are plagiarism-free and of top-quality. After all resulting adjustments have been completed the new equilibrium price: and industry output will be less than the initial price and output. An amusement park charges the same admission fee to local residents and out-of-towners d. D the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold. Firms go out of business in the long run if total revenue cannot cover total cost.
Setting the price too high will result in a low quantity sold, and will not bring in much revenue. Demand Curves Perceived by a Perfectly Competitive Firm and by a Monopoly A perfectly competitive firm acts as a price taker, so its calculation of total revenue is made by taking the given market price and multiplying it by the quantity of output that the firm chooses. A barrier to entry that signficantly contributes to the establishment of a monopoly would be A. The monopolist is facing perfectly elastic demand. Price may be equal to, greater than, or less than average total cost. Illustrating Monopoly Profits It is straightforward to calculate profits of given numbers for total revenue and total cost. Groups must have different elasticities of demand for the product.
The Inefficiency of Monopoly Most people criticize monopolies because they charge too high a price, but what economists object to is that monopolies do not supply enough output to be allocatively efficient. Therefore, the monopolist would be earning the maximum possible profits. Refer to the above data for a nondiscriminating monopolist. B inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price. The diagrams portray neither long-run nor short-run equilibrium. If a non-discriminating pure monopolist decides to sell one more unit of output, the. If the monopolist charges a very high price, then quantity demanded drops, and so total revenue is very low.