- Question 2 25 Marks A The Following Graph Shows Demand And Mr For A Monopoly 25 20 15 Demand 10 Marginal Revenue 5 1 1 (167.54 KiB) Viewed 12 times
- Question 2 25 Marks A The Following Graph Shows Demand And Mr For A Monopoly 25 20 15 Demand 10 Marginal Revenue 5 1 2 (428.8 KiB) Viewed 12 times
iv. If AC=MC= $10 (constant), at what price and output that will maximize the firm's profits? Calculate consumer surplus and producer surplus. (6 marks) V. What are the main characteristics of a monopoly firm that cause government to intervene and impose certain regulations on the monopolists? Explain. (3 marks) b) In a perfectly competitive industry, the market price is $25. A firm is currently producing 10,000 units of output, its average total cost is $28, its marginal cost is $20, and its average variable cost is $20. Given these facts, explain whether the following statements are true or false: i. The firm is currently producing at the minimum average variable cost. ii. The firm should produce more output to maximize its profit. iii. Average total cost will be less than $28 at the level of output that maximizes the firm's profit. Hint: You should assume normal U-shaped cost curves for this problem (6 marks) c) What is the main difference between monopolistic competition and perfect competition in the long run? Which market structure is more efficient? Explain and illustrate your answer using diagrams. (6 marks) (TOTAL: 25 marks)