ECON 1000V

Question C1 (20 marks): C1.1 1.1 Use a graph to demonstrate the circumstances that would prevail in a perfectly competitive market where firms are experiencing economic losses. (4 marks) 1.2 Identify costs, revenue, and the economic losses on your graph. (3 marks) 1.3 Using your graph, determine whether this firm will shut down in the short run or choose to remain in the market. Explain your answer. (3 marks) C1.2. - Complete the following total for marginal cost. (3 marks) - How many units of output should this monopoly firm produce in order to maximize its profits? (3 marks) - What is the market price of the product, and what is the maximum profit? (4 marks) Quantity Sold Price Marginal Revenue Total Cost Marginal Cost 0 20 – 5 1 19 19 7 2 18 17 10 3 17 15 14 4 16 13 19 5 15 11 25 6 14 9 32 7 13 7 40 8 12 5 49 9 11 3 59 10 10 1 70 Question C2. 20 marks.The graph below shows the demand curve (D), marginal revenue curve (MR), marginal cost curve (MC), average total cost curve (ATC), and long-run average total cost curve (LRATC) for a monopolist. Using the numbers given in the graph, identify each of the following for the profit-maximizing monopolist. (a) The quantity produced (b) The price (c) The allocatively efficient quantity (6 marks) (d) At the profit-maximizing quantity from part (a) is the monopolist experiencing economies of scale? Explain (2 marks) Now assume that the monopolist produces 10 units. Using the numbers given in the graph, calculate each of the following. Show your work. (e) The monopolist’s economic profit (f) The consumer surplus (g) The deadweight loss (6 marks) (h) At what quantity is demand unit elastic? (2 marks) Suppose the monopolist perfectly price discriminates and chooses the quantity that maximizes profit. Determine the dollar value of each of the following. (i) The monopolist’s profit (j) The consumer surplus (4 marks)