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Question 2 (a) The table below shows the information on price, output and cost of a firm. Quantity Price Total Cost 0 $10 $20 10
Question 2 (a) The table below shows the information on price, output and cost of a firm. Quantity Price Total Cost 0 $10 $20 10 $9 $60 20 $8 $90 30 $7 $140 40 $6 $200 50 $5 $280 60 $4 $400(b) Determine the optimal output of the fu'm had show why it is the optimal output and compute the prot or loss of the rm at the optimal output. At what price will cause this rm to shut down in the short run? At what price will cause this rm to exit from the industry in the long run\".J Between the short mm and long run shut down prices, which shut down price is higher and why? (10 marks) Consider a monopolist with demand function given by P = 30 0.2Q. marginal cost function given by MC = 10 + 0.1Q and xed cost equals 20. compute the optimal quantity, price. prot or loss= consumer surplus and producer surplus of the monopolist. Assume the market is perfectly competitive. Calculate the equilibrium price and quantity in the perfectly competitive market. Compare the outcomes of the monopoly market to the outcomes of the perfectly competitive market= analyse and examine whether the market under a monopolist is efficient. Support your answers by a relevant market diagram. (15 marks)
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