Use the following information for a monopoly firm to answer the following three
ID: 1158104 • Letter: U
Question
Use the following information for a monopoly firm to answer the following three questions. Assume that Q equals the level of output and all costs are economic costs. Total Revenue = 450Q - 0.5(Q squared) Marginal Revenue = 450 - Q Total cost = 2,000 + 50Q + 0.5(Q squared) Marginal cost = 50 + Q Flag this Question Question 30 1 pts 30. At the profit-maximizing or loss-minimizing output level, economic profit would equal: $8,000. $9,000 $18,000. $38,000. Flag this Question Question 31 1 pts 31.Under these conditions, the firm should produce an output of: zero (i.e. shutdown). 100. 200. None of the above. Flag this Question Question 32 1 pts 32. At an output of 200 units, average total costs equal: $160. $320. $30,000. $32,000. Flag this Question Question 33 1 pts 33. If long-run economic gains are being experienced in a monopoly market: More firms will enter the market. Entry barriers will restrict competition. Equilibrium price will rise as firms enter. None of the above
Explanation / Answer
31. Profit maximising condition: MR = MC
450 - Q = 50 + Q
400 = 2Q
Q = 200 units
30. Profit = TR - TC = 450Q - 0.5Q2 - 2,000 - 50Q - 0.5Q2 = 400Q - Q2 - 2000
= 400(200) - (200)2 - 2000 = 80000 - 40000 - 2000 = 38000
32. ATC = TC/Q = (2,000 + 50Q + 0.5Q2)/Q = (2000 + 50 x 200 + 0.5 x 200 x 200)/200
= (12000 + 20000)/200 = 32000/200 = 160
33. Entry barriers will restrict competition.
There is no free entry of new firms in monopoly market.