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Answer to Question #49286 in Microeconomics for Bradly

Question #49286
1) Suppose that at 200 units of output a monopolist is producing such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $5 per unit and is incurring average variable costs of $3 per unit and average total costs of $4 per unit. On the basis of this information we can conclude that the firm:



is operating at maximum profit by producing the 200 units of output


should increase its use of variables inputs in order to reduce its total variable costs TVC


is operating at a loss that is less than the loss incurred by shutting down


should close down

2) Under uniform pricing, a profit maximizing monopolist’s price is:



the same as the price that would prevail if the industry were perfectly competitive


less than the price that would prevail if the industry were perfectly competitive


greater than the price that would prevail if the industry were perfectly competitive


none of the above

3) If the uniform price of a monopolist’s good is $50 per unit and its marginal cost is $25, then:



to maximize profit the firm should increase output


to maximize profit the firm should decrease output


to maximize profit the firm should continue to produce the output it is producing


there is not enough information to determine whether output should be changed or remain constant to maximize profit
Expert's answer
1) Suppose that at 200 units of output a monopolist is producing such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $5 per unit and is incurring average variable costs of $3 per unit and average total costs of $4 per unit. On the basis of this information we can conclude that the firm:
a) is operating at maximum profit by producing the 200 units of output

2) Under uniform pricing, a profit maximizing monopolist’s price is:
c) greater than the price that would prevail if the industry were perfectly competitive

3) If the uniform price of a monopolist’s good is $50 per unit and its marginal cost is $25, then:
d)there is not enough information to determine whether output should be changed or remain constant to maximize profit

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