Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose a monopolist's marginal cost is MC = 4 per unit, her average variable cost is AV C = 10 per unit, and she sells

Suppose a monopolist's marginal cost is MC = 4 per unit, her average variable cost is AV C = 10 per unit, and she sells the good in the market for p = 14. Should the monopolist shut down in the short-run? Can we tell whether the firm is producing the optimal level of the good? Should it produce more or less? Explain.

(Note: The question does not directly tell us marginal cost for the monopolist, but can we calculate Marginal Revenue in this case by: total revenue = q*p = 14*q, hence marginal revenue = taking derivative of total revenue = 14?) Thanks!

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Economics of Strategy

Authors: David Besanko, David Dranove, Mark Shanley, Scott Schaefer

6th edition

978-1118273630, 111827363X, 978-1118319185

Students also viewed these Economics questions

Question

How is it determined which inventory system should be used?

Answered: 1 week ago