Economics

Economics

Question6 – answer $0

Thisis because for a monopoly to maximize profits, marginal revenue mustbe equal to marginal cost. From the figure given, where MR=MC, thequantity is 150. Price is determined by the demand or the averagerevenue. At quantity 150, the price is $30. Total revenue (P*Q)therefore is $750 ($30*150). At the price of $30 and quantity 150total cost also is $750 therefore the company makes $0 profit.

Question11 – answer must also shift

Whenthe demand curve in figure A shifts to the one shown in figure B,marginal revenue also shifts in the same direction as the demandcurve as shown in figure B. quantity also changes from Q in figure Ato Q_{2}in figure B.

Question15 – answer $1.17

Fora monopoly, profit maximizing quantity can be referred to as thequantity where marginal cost is equivalent to marginal revenue. Fromthe table: spring water, at quantity 6, profit is maximized. (TR-TC –60-53=7) SO, when producing 6 units the company makes a profit of $7,therefore profit per unit is $1.17 (Armstrong& Vickers 2015)(Total profit divided by quantity, = 1.17).

References

Armstrong,M., & Vickers, J. (2015). *Multiproductmonopoly made simple*(No.754).