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Draw a hypothetical graph to show the equilibrium of a monopolist in the shot-cun wih a economic profit. Indicate the equilbrium pont(as E eqaaibriam yua(as ) an price (as P) in the graph. Proparly label both aves and all graphs (3 marks) Instruction: Choose the one alternative that best completes the statement or answers the question. 1·The short-rua production function shows how eetput changes when A. The quantity of labor changes B. The quantity of capital changes C. Technology changes D. The fixed imputs change 2. When a firm is experiencing aconomies of e A. The marginal product curve slopes B. The long nun cos C. Diminishing retums average cost curve slopes downward to labor have been suspended D. The marginal cost curve slopes downwand 3. Total product divided by the total number of workers equals the A. Marginal product of labor. B. Average total cost.
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A monopoly market is said to exist when one firm is the sole producer of a product which has no close substitutes. Thus monopoly is negation of competition. The noted features of a monopoly market are: 1. There is a single producer or seller for the product. The entire supply of the product comes from this single seller. There is no distinction between firm and industry 2. There are no close substitutes for the product. The monopolist supplies an output which has no close substitutes. The absence of close substitute gives monopoly for the firm supplying the product. 3. There is not freedom of entry. The monopoly market pause strong barriers to the entry of new firms. 4. The monopolist aims at maximization of profit The demand curve of the monopolist will be a downward sloping curve. If the monopolist raises the price, the amount i can sell will fal In other words a monopolist can charge a high price by restricting its output. Thus it is important to note that a monopolist has the option to choose between the price to be charged or output to be sold. Thus in order to sell more the monopolist has to lower the price of his product The profit maximizing price output combination of a monopolist can be explained in the following figure.AC MC Pricc S* MR AR Output The monopolist aims at profit maximization. The monopolist will maximize his profit when his MC is equal to the MR and MC must be rising at the point of intersection. In other words the slope of the MC curve must be greater than the slope of MR at the point of intersection The monopolist will go on producing additional output so long as MR exceeds MC. His profit will be maximum and he will attain equilibrium at the level of output at which MR equals MC. In the given figure MC intersects MR at point E* and the equilibrium output is Q*. The price charged by the monopolist is P. Q is the equilibrium quantity of output and P* is the equilibrium price of the monopolist. The difference between the price (average revenue per unit) and the avcragc cost at Q* output is the cconomic profit of the monopolist. The monopolist here earns an economic profit equal to the area P*R*S*T* from the sale of output Q*. 1. The production function can be classified into shortrun production function and longrun production function. During shortrun, output is increased by increasing the application of the variable factor. Thus the behaviour of output is studied as Returns to a Factor. Thus the shortrun production function is otherwise known as the Returns to a factor.During longrun, output is increased by increasing the scale of production. Thus the behaviour of output is studied as Returns to Scale. Therefore the longrun production function is otherwise known as Returns to Scale. During shortrun the amount of capital used in production, technology and other fixed factors remaining the same. The output in increased by increasing the amount of variable factor namely labour. Answer: A. The quantity of labour changes. 2. The economies of scale refer to the situation where as the quantity of output goes up, the cost per unit goes down Answer: B. The longrun average cost curve slopes downward. 3. The average product of labour is the total product of labour divided by the number of units of labour employed. APL-Q/L Answer: Average product of labour.

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