Price-Searching Monopolist Instructions
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- Graph the marginal cost, marginal revenue, and demand schedules for your product, and submit the graph along with your record of prices.
- Explain your reasoning in the trial rounds. Looking back, would you have done anything differently?
- Show why producing and selling one unit beyond the optimal quantity would decrease profit in your market.
- Answer true or false and explain your answer: Monopolists must choose both price and quantity but competitive firms only choose quantity.
- Describe to your grandmother (or to mine, if yours happens to be an economist) why marginal revenue must be equal to marginal cost at the profit-maximizing level of output.
- Calculate the elasticity of demand at your profit-maximizing level of output. Use the point elasticity formula. Is demand elastic or inelastic at the optimal price? Why?
- Suppose the government imposes a new fixed tax of $10 per round as an operating fee, regardless of the amount produced. Consider the following questions:
- How would this influence the optimal price and quantity choice of your firm in the short run?
- How would this influence the optimal price and quantity choice of your firm in the long run?
12 years ago
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