Homework Answers
3. Given
| Quantity | ATC | TC | MC |
| 500 | 200 | 100,000 | - |
| 501 | 201 | 100,701 | 701 |
Additional one unit will cost $ 701 while the selling price is $ 650 that is less than the marginal cost hence the firm should not manufacture the additional 1 unit.
4. Difference between monopoly and perfect competition
| Perfect competition | Monopoly |
| Large number of sellers | Only one seller |
| Homogeneous product | Unique product |
| Firms are price taker. That is they cannot influence market price. | Firms are price maker. That is they can influence the market price of their product. |
| A number of substitutes are available. | No close substitutes are available. |
| Firms can enter and exit anytime from the industry. No barriers to enter or exit. | It is difficult to enter into this industry. Since, the firm has absolute control over resources. |
| Elasticity of the industries product is high. | Elasticity of this industries product is low. |
| Firms maximize profit at P=MC | Firms maximize profit at MR=MC |
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