A monopoly firm has a total fixed cost of Rs 100 and has the following demand schedule:
Quantity |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
Marginal Revenue |
100 |
90 |
80 |
70 |
60 |
50 |
40 |
30 |
20 |
10 |
Find the short run equilibrium quantity, price and total profit. What would be the equilibrium in the long run? In case the total cost is Rs.1000, describe the equilibrium in the short run and in the long run.
Quantity |
Price (P) (Rs) |
TR = (P*Q) (Rs) |
1 |
100 |
100 |
2 |
90 |
180 |
3 |
80 |
240 |
4 |
70 |
280 |
5 |
60 |
300 |
6 |
50 |
300 |
7 |
40 |
280 |
8 |
30 |
240 |
9 |
20 |
180 |
10 |
10 |
100 |
As the full cost of the monopolist firm is zero, the income can be the maximum in which TR is the maximum. That is, on the sixth unit of output the firm might be maximizing its profit and the fast run equilibrium price might be Rs 50.
income of the firm = three hundred
quick run equilibrium charge = Rs 50
profit = TR - TC
= 300 - 0
income = Rs 300
If the whole price is Rs one thousand , then the equilibrium may be at a point in which the distinction among TR and TC is the most.
TR is the maximum on the 6 th level of output.
So earnings = 300 – 1000 = - seven-hundred
So, the company is earning losses and now not earnings. as the monopolist company is incurring losses inside the short run, it'll stop its production in the long run.
List the three different ways in which oligopoly firms may have.
Will the monopolist firm continue to produce in the short run if a loss is incurred at the best short run level of output?
If duo poly behavior is one that is described by Cornet, the market demand curve is given by the equation q = 200 - 4p and both the firms have zero costs, find the quantity supplied by each firm in equilibrium and the equilibrium market price.
Comment on the shape of MR curve in case when TR curve is a
(a) Positively sloped straight line
(b) Horizontal straight line
From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Marginal Revenue |
10 |
6 |
2 |
2 |
2 |
0 |
0 |
0 |
- |
What would be the shape of the demand curve so that the total revenue curve is?
(a) A positively sloped straight line passing through the origin?
(b) A horizontal line?
What is meant by prices being rigid? How can oligopoly behavior lead to such an outcome?
If the monopolist firm of Exercise 3 was a public sector firm. The government set a rule for its manager to accept the government fixed price as given (i.e. to be a price taker and therefore behave as a firm in a perfectly competitive market). And the government has decided to set the price so that demand and supply in the market are equal. What would be the equilibrium price, quantity and profit in this case?
The market demand curve for a commodity and the total cost for a monopoly firm producing the commodity are given in the schedules below.
Quantity |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
Price |
52 |
44 |
37 |
31 |
26 |
22 |
19 |
16 |
13 |
Quantity |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
Price |
10 |
60 |
90 |
100 |
102 |
105 |
109 |
115 |
125 |
Use the information given to calculate the following:
(a) The MIR and MC schedules
(b) The quantities for which MIR and MC are equal
(c) The equilibrium quantity of output and the equilibrium price of the commodity
(d) The total revenue, total cost and total profit in the equilibrium
Explain why the demand curve facing a firm under monopolistic competition is negatively sloped.
Explain the concept of a production function
Explain market equilibrium.
Discuss the central problems of an economy.
What are the characteristics of a perfectly competitive market?
What do you mean by the budget set of a consumer?
What is the total product of input?
When do we say that there is an excess demand for a commodity in the market?
What do you mean by the production possibilities of an economy?
How are the total revenue of a firm, market price, and the quantity sold by the firm related to each other?
What is budget line?
Considering the same demand curve as in exercise 22, now let us understand for free entry and exit of the firms producing commodity X. Also assume the market consists of identical firms producing commodity X. Let the supply curve of a single firm be explained?
q*= 8+3p for p ≥ 20
= 0 for 0 ≤ p ≤ Rs 20
(a) What is the significance of p =20?
(b) At what price will the market for X be in equilibrium? State the reason for your answer.
(c) Calculate the equilibrium quantity and number of firms.
What is a production possibility frontier?
What happens to the budget set if both the prices as well as the income double?
When do we say that there is an excess demand for a commodity in the market?
What is the law of variable proportions?
Distinguish between microeconomics and macroeconomics.
When does a production function satisfy decreasing returns to scale?
How is the optimal amount of labor determined in a perfectly competitive market?
Explain price elasticity of demand.
Will a profit-maximising firm in a competitive market produce a positive level of output in the long run if the market price is less than the minimum of AC? Give an explanation.