0
A monopoly incurs a marginal cost of 1 for each unit produced If the price elasticity of demand equals -2.0. How mutch the monopoly maximizes profit by charging a price of?
Wiki User
∙ 14y agoWant this question answered?
Be notified when an answer is posted
Add your answer:
Earn +20 pts
What is the price elasticity of demand for a monopolist?
Elasticity of demand is critical in determining the price which maximizes profits.The monopoly pricing rule says to set (P-MC)/P=1/e, where e is the ABSOLUTE VALUE of the price elasticity of demand. (Remember, price elasticities are negative.)Note that MC is the marginal cost at the quantity produced. If it's not constant, some calculation is required to figure out how much Q to make.
How will equilibirium be determined under discriminating monopoly with two markets?
It will be so because it will not achieve a social equilbrium of marginal benefit (demand) = marginal cost (supply). It will instead set a private profit equilibrium where private benefit (marginal revenue) = marginal cost and thus create a deadweight inefficiency equal to the difference in total social surplus between the regions.
What should a monopoly do if marginal revenue exceeds marginal cost?
increase output
Why supply curve of a monopoly equals to its marginal cost curve?
It's not
The supply curve of a monopoly is its marginal cost curve true or false?
Flase, The suuply curve of a "perfect competition" is its marginal cost curve
What is the price elasticity of demand for a monopolist?
Elasticity of demand is critical in determining the price which maximizes profits.The monopoly pricing rule says to set (P-MC)/P=1/e, where e is the ABSOLUTE VALUE of the price elasticity of demand. (Remember, price elasticities are negative.)Note that MC is the marginal cost at the quantity produced. If it's not constant, some calculation is required to figure out how much Q to make.
How will equilibirium be determined under discriminating monopoly with two markets?
It will be so because it will not achieve a social equilbrium of marginal benefit (demand) = marginal cost (supply). It will instead set a private profit equilibrium where private benefit (marginal revenue) = marginal cost and thus create a deadweight inefficiency equal to the difference in total social surplus between the regions.
What should a monopoly do if marginal revenue exceeds marginal cost?
increase output
Why supply curve of a monopoly equals to its marginal cost curve?
It's not
The supply curve of a monopoly is its marginal cost curve true or false?
Flase, The suuply curve of a "perfect competition" is its marginal cost curve
Discuss equilibrium of a firm under monopoly what are the conditions of equilibrium?
when marginal revenue equal to marginal cost,when marginal cost curve cut marginal revenue curve from the below and when price is greter than average total cost
Why monopoly is allocatively inefficient relative to perfectly competitive market?
A monopoly produces at a point where marginal revenue equals marginal cost, they don't charge this price, but charge a higher price that corresponds with the demand they face. Therefore they produce less and charge more than a competitive firm that equates the price to marginal cost.
If marginal cost is 0 how would you find optimal price?
if mc=0, its a natural monopoly.
The controller of a monopoly sets the price of goods by charging?
the price at which the profit is maximized
How a monopoly firm will not achieve allocative efficiency?
They produce at a different point than a competitive firm, a monopoly produces at a point where marginal revenue= marginal cost, where a competitive firm equates price to marginal cost. The marginal cost curve is lower than the demand curve, but the monopoly charges the price at the demand curve, which is a higher price and a lower quantity than a competitive market would produce.
Why is the marginal revenue curve the same as its demand curve?
The marginal revenue curve describes the incremental change in revenue (that is, price*units sold). The MR is not always equivalent to its demand curve. The more perfect competition is, the closer demand approaches the MR. This is because, in perfect competition, firms sell at the MC = MR = P criterion. In the opposite case, monopoly, MR always lies under of demand, and firms achieve monopoly profits by choosing a production quantity where MC = MR and charging a price mark-up.
Importance of elasticity of demand and supply?
exploitation of monopoly power in market-the extent to which a firm or firm with monopoly power can raise price in market to extract consumer surplus and it into extraprofit
