Question
Company Kappa is a profit-maximizing monopolist currently incurring economic losses. Draw a correctly labeled graph for Company Kappa. Label the axes and: Profit-maximizing price (PE)
Company Kappa is a profit-maximizing monopolist currently incurring economic losses.
Draw a correctly labeled graph for Company Kappa. Label the axes and:
Profit-maximizing price (PE)
Profit-maximizing quantity (QE)
Socially optimal quantity (Qso)
Why would this firm continue to operate despite its economic losses?
Shade the area of consumer surplus.
Assume this monopolist became able to perfectly price discriminate. Identify if the following would increase, decrease, or remain constant:
The firm's profit-maximizing quantity of output
Consumer surplus
Company Kappa hires in a perfectly competitive labor market. Draw a correctly labeled labor market graph, labeling the axes, equilibrium wage (We), and equilibrium quantity of labor employed (QE).
The government funds a free training program for labor. Illustrate the effect of this training program only on the graph from part (e).
Will the quantity of labor employed increase, decrease, or stay the same?
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Company Rho operates in a perfectly competitive market and is incurring economic losses.
Draw correctly labeled side-by-side graphs for the market and for Company Rho. Label the axes and:
the market price (PE) and market quantity (QE)
the firm's quantity of output (QE)
the firm's average total cost (ATC)
completely shade the area of consumer surplus in the market
What will happen to the market price and Company Rho's profits in the long run if it remains in the market? Explain.
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