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Using Figure 1, find the following values to two decimal places. 1. How many units will the monopolist want to produce? 2. Wh
Figure 1: A Monopolist Firm 1000/ 950 900 A It ATC LALA MR 9 10 11
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Answer #1

1. The monopolist produce at the profit maximizing output where the marginal cost equals the marginal revenue, the monopolist will produce 3 units of the commodity.

Ans; 3 UNITS.

2. The monopolist will charge where the marginal cost equals the marginal revenue.

Ans: Price- 600.

3.

Profits

  =(P ATC) x Q.

450) x 3 (600

  450

Ans: Profits- 450

4.

MC ATC Price Consumer surplus D MR Quantity OValue of consumer surplus

(e) bh 2.

1 3 x 350 2

  525.

5. When the firm perfectly price discriminates , the firm charges the maximum willingness to pay of a buyer. With the perfect price discrimination the consumer surplus equals zero and there will be only producer surplus. This is shown in the below graph.

MC ATC Price Producer surplus MR QuantityAns: Consumer surplus equals 0.

6.

Profits -1181.25

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