Posted: December 7th, 2015
Economics Monopoly – Problem Set
Question 1
Consider a monopolist firm which supplies in a market where demand for its
product is given as P=30-2Q.
Total cost is given in the following table.
Find the profit maximizing point, and profit.
Q TC
0 10
1 35
2 51
3 60
4 70
5 82
6 96
7 112
8 130
9 150
10 172
11 197
12 225
13 256
14 290
15 329
Question 2
Monopolies use their market power to:
a. charge prices that equal minimum average total cost.
b. attain normal profits in the long run.
c. restrict output and increase price.
d. dump excess supplies of their product on the market.
Question 3
If a monopolist can sell 7 units when the price is €3 and 8 units when the price is
€2, then marginal revenue of selling the eighth unit is equal to
a. €2.
b. €3.
c. €16.
d. €-5.
2
Question 4
Q Price TC
0 40 10
1 30 15
2 20 25
3 10 40
4 0 60
i) How much is the marginal revenue of the second unit?
ii) How much is the marginal cost of the fourth unit?
iii) How much is the maximum profit a monopolist can earn?
iv) What price would the monopolist set to maximize profit?
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