BUS0615/PRINCIPLES OF ECONOMICS
Reading: Chapter 13 of the textbook
| |Refer to the diagram below for a non-discriminating monopolist and answer the following questions 1 to 7: | | | |[pic] | | |1. |The profit-maximizing output for this firm is M. |T / F | |2. |At the profit-maximizing output the firm's economic profit will be BAFG. |T / F | |3. |At output R economic profits will be zero. |T / F | |4. |At output Q production will be unprofitable. |T / F | |5. |The profit-maximizing price for this firm is J. |T / F | |6. |At output M total cost will be 0CHM. |T / F | |7. |If the government regulates the monopolist so that it charges the socially optimal price, the monopolist will |T / F | | |produce output Q. | | |8. |A monopoly is an industry with a single firm in which the entry of new firms is blocked. |T / F | |9. |If entry of new firms is prohibited in a pure monopoly industry the monopolist may be able to earn normal profit in|T / F | | |the long run. | | |10. |The pure monopolist’s demand curve is the industry demand curve. |T / F | |11. |A monopolist sets the price at which marginal revenue equals marginal cost. |T / F | |12. |When a monopolist incurs a loss it will produce as long as its total revenue covers its total variable costs. |T / F | |13. |Natural monopolies result from extensive economies of scale in production. |T / F |
|SECTION B | |1. |[pic] | | |Refer to the diagram above. Determine the: | | | | | | |i. |Price equilibrium | | |ii. |Quantity equilibrium | | | | | | |At equilibrium, calculate the: | | | | | | |iii. |Total variable costs | | |iv. |Total costs | | |v....