Question

pleaser answer all four questions. thank you.

10 MC 8 Price and costs (dollars per unit) ATC 6 4 2. MR D 0 2 4 6 8 10 12 Quantity (units per year) The graph above describes a profit-maximizing monopolist. If the monopolist charges a price of $4, how many units will the monopolist sell? O4 O 6 o 8

Answer 1

1> D 6

The corresponding quantity on the demand curve for a price of $4 is 6 units.

2> A

Since it is an increasing cost industry, the average cost to produce more units will be higher, thus it would be more than $2 but it will be less than $4 because there will be more firms who will enter the market which will drive down the price in the long run.

3> C

We can see that ATC is the lowest at 30 units and then it starts increasing and it is more than $14 after 40 units. So, somewhere between 30 and 40 mugs, the profit will be maximum.

4> B

At a quantity of 8 units, clearly ATC is more than the corresponding price of $2, so he will make economic loss.