Question #2
A monopolist faces a demand given by p = 30 - 3y. Its cost function is c (y) = 3y 2 + 6 y
a) What is the optimal level of output for a monopolist?
b) What is a monopolist price?
c) What is the total profit (or loss)?
d) Show answers to (a), (b), and (c) on a graph that includes demand, MR, and MC
e) Calculate the dead weight loss because of inefficiency of exercising monopoly power?
Question #3
A perfectly competitive firm has the cost curves drawn in the following diagram (note: SRMC indicates the short-run marginal cost curve, SRAC is the short-run average total cost curve, and AVC is the average variable cost curve)
If the firm's output sells for $3 per unit:
a) What is the firm's profit-maximizing output in the short run?
b) Calculate the firm's total revenue
c) Calculate the firm's short-run total cost
d) Is there a profit or a loss? If then, how much is it?
e) If the firm's output sells for $2 per unit, what quantity of output the firm should supply on the market? Why?