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1: Because of a patent, Company Z has a monopoly on a new product, which it brands Uusi. Company Z is a profit-maximizing firm and
1: Because of a patent, Company Z has a monopoly on a new product, which it brands Uusi. Company Z is a profit-maximizing firm and is earning positive economic profits in the short run. A. Draw a graph of Company Z's market for Uusi. i. Label the profit-maximizing price (Pm). ii. Label the profit-maximizing quantity (Qm). B. Shade the area of deadweight loss. C. What would happen to company Z's economic profits in the long run without government intervention? D. Assume that Pm = $10 and the average total cost at the profit-maximizing quantity is $5. If the firm is earning $600 in economic profit, how many units of Uusi is it producing? E. On your graph from part (A), label the allocative lit efficient price (Pe) and quantity (Qe). F. Is company Z producing in the elastic or inelastic range of its products demand? Explain. G. Based on the information from part (D), what is the total revenue of company Z? H. Assume that company Z becomes able to perfectly price discriminate. i. What would happen to its output? ii. What would happen to consumer surplus? Question 2: epsilon electronics is a firm operating in a monopolistically competitive market. It is currently earning positive economic profits. A. Draw a fully labeled graph of Epsilon electronics. Label the profit-maximizing quantity (Qm) and the profit-maximizing price (Pm). B. Shade the area of profit. C. What would happen to Epsilon electronics' profits in the long run? Explain. D. Does epsilon electronics achieve productive efficiency in the long run? Explain
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