Principles of economics: understanding monopoly Essay

Refer to the diagram below for a non-discriminating monopolist and answer the following questions 1 to 7 pic 1. The profit-maximizing output for this firm is M. T / F 2. At the profit-maximizing output the firms economic profit provide be BAFG. T / F 3. At output R economic profits will be zero. T / F 4. At output Q production will be unprofitable. T / F 5. The profit-maximizing bell for this firm is J. T / F 6. At output M total cost will be 0CHM. T / F 7.If the government regulates the monopolist so that it charges the socially optimal price, the monopolist will T / F produce output Q. 8. A monopoly is an perseverance with a single firm in which the entry of new firms is blocked. T / F 9. If entry of new firms is prohibited in a pure monopoly assiduity the monopolist may be able to earn normal profit inT / F the long run. 10. The pure monopolists get hold of curve is the industry demand curve. T / F 11. A monopolist sets the price at which peripheral rev enue equals marginal cost.T / F 12. When a monopolist incurs a detriment it will produce as long as its total revenue covers its total variable costs. T / F 13. congenital monopolies result from extensive economies of scale in production. T / F SECTION B 1. pic Refer to the diagram above. Determine the i. outlay equipoise ii. Quantity equilibrium At equilibrium, calculate the iii. Total variable costs iv. Total costs v. Total fixed costs vi. Total revenue vii. Total profit/loss 2.The following diagram shows the costs and revenues for the producer of Company DeMassa. pic AR = average revenue MR = marginal revenue AC = average cost MC = marginal cost a. At what output and price will the producer maximize its profits? Explain b. How much profit/loss will be do? Should the firm continue production? c. Would you categorize Company DeMassas market structure as perfect competition or imperfect competition? Explain. d. identify four characteristics of the market structure above. e. Based on part a, calculate the total fixed cost of the firm. SECTION C 1. Explain the various price discrimination practices. Price discrimination is bad for the public. Do you agree with this statement? 2. List four types of barriers to entry. 3. Explain the advantages and disadvantages of monopoly. MC AC AVC 9 10 11 12 AR Quantity (million, unit) MR Price, $ 7 6 5 4 Quantity (000) MR AR 22 20 17 16 14 Price (RM) MC AC AVC 160 185.