The perfectly competitive firm exhibits resource allocative efficiency (P = MC), but the single-price monopolist does not. What is the reason for this difference? b. Explain three reasons why monopolies arise. c. Why is the marginal revenue of a perfectly competitive firm equal to the market price? d. Would a perfectly competitive firm produce if price were less than the minimum level of average variable cost? Why?
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a. The
b. Explain three reasons why
c. Why is the marginal revenue of a perfectly competitive firm equal to the market price?
d. Would a perfectly competitive firm produce if price were less than the
minimum level of
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- (a) What is meant by consumer surplus and producer surplus? Using a diagram show that there is a deadweight loss to society from monopoly in terms of total surplus. (b) In what ways is a monopolistically competitive firm likely to be less efficient than one under perfect competition?a. b. If a firm's the price elasticity of demand (Eg) to be-3.5 and marginal cost (MC) is $15. Using the mark-up rule, what is the optimal price for the firm to charge? If the price elasticity of demand (En) changes to -3.0, and MC is still $15. Use the mark-up rule to find the new optimal price for the firm to charge? What is the defining feature of a Pure Selling Problem and what impact does it have one the firm's goal to maximize profit?A perfectly competitive firm is onsidered to be more generous in terms of price and quantity of output in comparison to firm belonged to monopoly and monopolistic markets. C. If firms incurring loss in this market begin to exit the market, what will happen to the market equilibrium? Demonstrate your answer using a simplified graph. d. The firm wishes to supply output more than the quantity determined under the equilibrium condition, is it worth to pursue?
- You live in a town with 300 Adults and 200 children, and you arc thinking about putting on a play to entertain your neighbors and make some money. A play has a fixed cost of $2,000, but selling an extra ticket has zero marginal cost. Here are the demand schedules for your two types of customer: a. To maximize profit, what price would you charge for an adult ticket? For a child's ticket?How much profit do you make?b. The city council passes a law prohibiting you from charging different prices to different customers. What price do you set for a ticket now? How much profit do you make?c. Who is worse off because of the law prohibiting price discrimination? Who is better off? (If you can, quantify the changes in welfare.)d. If the fixed cost of the play were $2,500 rather than $2,000, how would your answers to parts (a), (b), and (c) change?A perfectly competitive firm is considered to be more generous in terms of price and quantity of output in comparison to firm belonged to monopoly and monopolistic markets. a. Demonstrate a simplified graph to show that a perfectly competitive firm incurring loss, but has reached the minimum condition to keep operating in the market. b. Does the firm operate in the short or long run based on your answer to question (a). Why?Which market offers higher consumer surplus and why? The perfectly competitive firm or the monopoly firm?
- Comparing a perfectly competitive market to a monopoly, which of the following is true? a. Price will be higher and quantity will be lower in the perfectly competitive market than in the monopoly. b. Price will be equal to marginal revenue in the perfectly competitive market but will be higher than marginal revenue in the monopoly. c. at that point on the market demand curve which intersects the marginal cost curve. d. Price will be higher than marginal cost in the perfectly competitive market but will be equal to marginal cost in the monopoly.Your business, which has some market power, has the following demand (D), marginal revenue (MR), marginal cost (MC), and average cost (AC) curves. Move point E to label the profit-maximizing price and quantity for your firm. If the goal of your business is to maximize profit, how much will it produce, and what price will it charge? -The business will exit the market because it is unable to cover its average costs. -The business will produce 40 units, and charge a price of $5. -The business will produce 30 units, and charge a price of $3. -The business will produce 30 units, and charge a price of $6.Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD Demand :P =1000-10Q Total Revenue : TR=1000Q-10Q2 Marginal Revenue: MR=1000-20Q Marginal Cost: MC=100+10Q Where Q indicates the number of copies sold and P is the price in Ectenian dollasrs. a. Find the price and quantity that maximize the company's profit b. Find the price and quantity that would maximize social welfare c. Calculate the deadweight loss from monpoly. d. Suppose in addition to the costs above. the director of the film has to be paid. The company is considering four options i. a flat fee of 2000 Ectenian dollars ii. 50 percent of the profits. iii. 150 Ectenian dollars per unit sold iv. 50 percent of the revenue. For each option, calculate the profit-maximizing price and quantity. Which if any of these compensation schemes would alter the deadweight loss from monopoly. Explain.
- Compare and contrast the decision-making processes of a competitive firm versus a monopoly firm. a. The difference between C and M markets in terms of the (homogeneity or uniqueness of product, barriers to enter and number of firms). b. You must point to the difference in the demand curve for a C firm and that for a M firm. c You must refer to the long run profit (or not) of the C as well as M firm. d. You must point to whether C and M firms are efficient or NOT. Graphs are welcome, not manadatory.d. What is the deadweight loss in this market, if any? e. How does a firm decide to increase or decrease output? i. What do they do when marginal revenue is less than marginal cost? ii. What do they do when marginal revenue is more than marginal cost? f. When does a firm decided to shut down verses temporarily stopping production? g. In this market the demand curve is what? i. Short run ii. Long run h. In this market the supply curve is what? i. Short run ii. Long run4. Draw a demand, marginal revenue and marginal cost curve for a monopoly firm. Be sure to label axes and curves. a. Identify efficient and equilibrium quantity exchanged. b. Identify monopoly price. c. Explain why I am not asking for a supply curve. 5. Explain what is the relationship between marginal cost and average total costs for a firm or industry exhibiting each of the following: a. Economies of scale. b. Constant returns to scale. c. Diseconomies of scale. 6. Assume that the economy is facing the zero lower bound. a. Explain how the Federal Reserve might engage in expansionary monetary policy and what that will do when the economy is facing the zero lower bound. b. Explain how expansionary fiscal policy might influence the economy when facing the zero lower bound. Please answer all questions