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The table below presents information about price, output and costs of a single firm in the aluminum market. Use the information below and fill-in columns for TR, MR, MC, ( 3 points) P QD TC TR MR MC 4

Eco 105 Homework # 7 9 Points Name: _______________________ 1. The table below presents information about price, output and costs of a single firm in…

The table below presents information about price, output and costs of a single firm in the aluminum market. Use the information below and fill-in columns for TR, MR, MC,  ( 3 points) P                    QD           TC                TR               MR          MC       400                  0             140350                  1             220         300                  2             320         250                  3             440200                  4             580150                  5             740100                  6             940 Is the firm operating in the short-run or long-run? Why What is the profit maximizing level of output and price for this firm? Explain why Is the firm making positive profit or suffering loss? Calculate the firm profit or loss. If the firm is making positive economic profit or loss, what will happen in long-run? Explain Suppose this firm becomes perfectly competitive firm. What quantity will the firm produce and what will the price charge? The graph below represents monopoly firm               (4 points) a. Refer to the graph above, what quantity would this monopoly firm produce to maximize profit and why? b. Refer to the graph above, what price would this monopoly firm charge to maximize profit?    c. Refer to the graph above. Would the monopoly firm earn profit, operate at loss or shut down? Why?  Calculate the firm total profit or loss  TR =                                                                              TC = Profit/Loss = d. If the monopoly from above is earning short-run profit, what will happen in the long-run? Explain                                                                          e. Is the market above efficient? Why yes, why not? f. Refer to the graph above. If the monopoly above will become perfectly competitive firm with the same costs, the firm will produce __________ units to maximize profit and will charge price _______ per unit g. Refer to your answer above. The dollar reduction in the market efficiency will be equal to __________ h. Refer to the graph above. If the government agency would impose on the monopoly above price ceiling at the socially optimal price:The regulated monopoly would produce __________units of output and would charge price _______ per unit. As the result of government regulation market efficiency would be (increased, decreased) _________ by $ ________The regulated monopoly would earn $__________ (profit/loss) and the amount of the government subsidy would be $ _________ i. Refer to the graph above. If  the government agency would impose on the monopoly above price ceiling at the fair return price, the regulated monopoly would produce _________ units, charge price _______per unit and would earn $__________in profits 2. For cases A through D below, would you operate or shut down in the short-run. Briefly explain your answer in each case.  (2 points)                                                         A               B                 C                  DTotal revenue                              1,500           2,000           5,000           5,000Total cost                                    1,500           1,500           6,000           7,000Total fixed cost                              500             500            1,500           1,500 Case A: Case B: Case C: Case D Extra Points (4 points)1. The monopoly power created by government when it grants a patent is costly for society, but also benefits society by encouraging more research and development. True or false? Explain    2. The social cost of monopolies is measured completely by the deadweight loss associated with monopolies. True or false? Explain 3. Since the monopolist’s marginal revenue is below its price, its equilibrium output is the same as a perfectly competitive firms. True or false? Explain your answer 4. Why might a monopoly earn an economic profit in the long-run? How does it differ from the situation faced by a perfectly competitive firm? Explain

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Eco 105
Homework # 7
9 Points
Name: _______________________
1.
The table below presents informa±on about price, output and costs of a single Frm in the
aluminum market. Use the informa±on below and Fll-in columns for TR, MR, MC,
( 3 points)
P
QD
TC
TR
MR
MC
400
0
140
350
1
220
300
2
320
250
3
440
200
4
580
150
5
740
100
6
940
a.
Is the Frm opera±ng in the short-run or long-run? Why
b.
What is the proFt maximizing level of output and price for this Frm? Explain why
c.
Is the Frm making posi±ve proFt or su²ering loss?
d.
Calculate the Frm proFt or loss.

View the Answer

e.
If the Frm is making posiTve economic proFt or loss, what will happen in long-run? Explain
f.
Suppose this Frm becomes perfectly compeTTve Frm. What quanTty will the Frm produce and
what will the price charge?
2. The graph below represents monopoly frm
Q u a n t i t y p e r d a y
0
$ 0
$ 1
$ 2
$ 3
$ 4
$ 5
$ 6
$ 7
$ 8
$ 9
$ 1 0
D e m a n d
M R
M C
A T C
1 5 0
3 0 0 3 5 0 4 0 0
(4 points)
a. Refer to the graph above, what quanTty would this monopoly Frm produce to maximize proFt and
why?
b. Refer to the graph above, what price would this monopoly Frm charge to maximize proFt?

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