Economics (Irwin Economics)
21st Edition
ISBN: 9781259723223
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 10, Problem 2DQ
To determine
Pure competition.
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A local magic shop has a monopoly on the production of magic wands. Each customer wants only one magic
wand, and the table below shows each customer's willingness to pay. The marginal cost of producing a wand is
$21 no matter how many are produced.
Quantity demanded
Price per wand ($)
LO
01 2 3 4 5
6 78
30 27 24 21 18 15 12 96
If the shop can charge only a single price, it will charge $
wands.
If the firm practices perfect price discrimination, it will sell a total of
earn a profit of $|
and sell
wands and
Consider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the
same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph.
COSTS (Dollars per pound)
80
72
64
56
co
o
32
+
16
8
0
0
4
MC
0
ATC
AVC
8 12 16 20 24 28
QUANTITY (Thousands of pounds)
32
38, 72
36
40
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q
0
1
2
3
4
5
6
TFC
$5
5
5
5
5
5
5
TVC
$0
3
LO
5
9
16
25
36
MC
-
$3
2
4
7
9
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P = MR
$5
5
5
5
LO
5
5
5
A profit-maximizing firm should produce a quantity of
TR
$0
5
10
15
20
25
30
TC
$5
8
10
14
21
30
41
Profit
$-5
- 3
0
1
- 5
11
units. (Enter your response as a whole number.)
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