Question
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!
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