Monopoly versus Perfect Competition Consider the following graph: Based on the a
ID: 1234166 • Letter: M
Question
Monopoly versus Perfect Competition
Consider the following graph:
Based on the above graph, answer the following questions for a monopoly and a perfectly competitive firm.
A. For the monopolist:
i. Profit maximizing output =
ii. ATC =
iii. AR =
iv. Price =
v. Total Revenue =
vi. Total Cost =
vii. Profit =
B. For the perfectly competitive firm:
i. Profit maximizing output =
ii. ATC =
iii. AR =
iv. Price =
v. Total Revenue =
vi. Total Cost =
vii. Profit =
C. Discuss the differences you observe in your answers above between the monopoly and perfectly competitive firm.
Explanation / Answer
a) i) Profit maximising output when MC = MR, from the graph, ans = 20 From 20, the rest u read off the graph when Q = 20 ii)ATC = slightly below $18 iii)AR = DEMAND = $30 iv)P=AR = $30 V)TR = P*Q= 30*20=600 vi)TC = ATC*20= 360 vii)Profit = 600-360 = 240 b) i)Profit Maximising output when P=MC, from the graph, Q=35 ii)ATC around 15 (hard to see as no grid) iii)AR =demand = 21 iv)P=AR=21 v)TR=P*Q=21*35=735 vi)TC=ATC*35=525 vii)Profit = 735-525=210 c) Monopolist produce less output(not socially optimum), charges more expensive, higher profit PC produces more output and charges cheaper, less profit