Start the slide show from the current slide The im aehows th

Start the slide show from the current slide The im aehows the stermancd ancrvesasinsle-price monopely rereme at the protie dinss tevel ofoutest is stoo Ouestion 20 The figure above shows the demand and cost curves for a single-price monopoly. The firm\'s economie profit equals A. SO S30O, Sioo. Question 21 The figure above shows the demand and cost curves for a single-price monopoly. Which of the tollowing statements is EALSE A.)To maximize its profit, the firm will set marginal revenuc equal to zero. B. The firm will make an economic profit C. The firm is a not a natural monopoly D- The firm, will set price where demand is elastic. Question 22 The short-run supply curve of a MC 50 perfectly competitive tirm isg ATC mpatitive nirn in giv over and above the shut-dow urve over and above the ATC curve The rising portion of its MC curve The rising portion of its MC curve C The rising portion of its A D. The rising portion ofits MC curve ver and above the break-eve 30 20 10 15 20 25 30 MR Quontity Junits per day

Solution

1. The profit-maximizing level of output is where MR=MC. This happens at Q=10. The corresponding price is P=$30. Hence total revenue is $30 x 10 = $300. The correct answer is (B) i.e $300.

2. The firm\'s economic profit equals Q x(P - ATC) = 10 x (30-20) = 100. Hence the correct answer is (C) i.e $100.

3. The statement which is false is (A) i.e to maximize the profit, the firm will set marginal revenue equal to 0. The correct statement is to maximize the profit, the firm will set marginal revenue equal to marginal cost. Hence the answer is the option (A).

4. The short-run supply curve of a perfectly competitive firm is given by the rising portion of its MC over and above the shutdown point. Thus the correct answer is (A).