Briefly describe the three-step process for the monopolist.
What will be an ideal response?
Step one is to find where marginal revenue equals marginal cost and proceed straight down to the horizontal (quantity) axis to find QM, the profit-maximizing output level for the monopolist.
Step two is, at QM, go straight up to the demand curve and then to the left to find the market price, PM. Once you have identified PM and QM, you can find total revenue at the profit-maximizing output level because TR = P ´ Q.
The last step is to find total cost. Again, go straight up from QM to the average total cost (ATC) curve and then left to the vertical axis to compute the average total cost at QM. If we multiply average total cost by the output level, we can find the total cost (TC = ATC ´ Q).
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Suppose Guild produces 5,000 guitars per year. Its average total cost is $90, and its fixed cost is $250,000 . What is its variable cost?
a. $250,000 b. $450,000 c. $25,000 d. $56,000 e. $200,000
In the balance of payments, a deficit item is any transaction
A) that leads to a receipt by a resident of a country or its government. B) that leads to a payment by a resident of a country or its government. C) that is an export of a good or service. D) that makes residents of a country worse off.
Assumptions in models tend to make
A. the model more realistic. B. the model predict what the scientist wants the results to be. C. the model more applicable to specific circumstances. D. the model always predict the future accurately.
Suppose Jill's consumption bundle is made up of 2 goods, apples and bottles of juice. If the price of an apple increases, then Jill's budget line would
A) not change. B) shift towards the origin on the apples axis only. C) shift towards the origin on both the apples and bottles of juice axes. D) shift away from the origin on the bottles of juice axis only.