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Consider a monopoly whose total cost function is TC=Q3-30Q2+302Q, whose marginal cost function is MC= 3Q2-60Q+302, whose demand is P=329-30Q, and whose marginal revenue function MR= 329-60Q, where Q is output and P is price.
Assume that the firm maximizes profit but cannot practice price discrimination
How much does the firm produce?
How much does the firm charge?
How large are the firms profit?
How would you evaluate a proposal to ban cigarette smoking? Would a ban on smoking necessarily be economically efficient?
Why might a tax on cigarettes induce the market for cigarettes to perform more efficiently?
Explain why cigarette smoking is often described as a good with negative externalities.
Why is it the case in a long-run monopolistically competitive equilibrium that the firm’s demand curve is tangent to its average cost curve? Why could it not be a long-run equilibrium if the demand curve “cut through” the average cost curve?
"What is the point of entering a perfectly competitive industry if it is simply to earn zero profits anyway?" Discuss this statement with reference to the long and short run, as well as to heterogeneity across firms.
Consider a monopolized industry. Is the deadweight loss from this industry greater if (1) the government sets price equal to average total cost or (2) the government sets price equal to marginal cost? Why? Use examples of monopoly form your own country to answer this question.
Why are price floors said to be inefficient? Can the government restore efficiency by imposing a production quota along with the price floor? Who benefits and who loses from such a program?
Why are price ceilings said to be inefficient? Can the government restore efficiency by imposing a production quota along with the price ceiling? Who benefits and who loses from such a program?
Consider a monopoly whose total function
