Question
Could someone do parts C and D? The following information is for a monopoly: P Q...
Could someone do parts C and D?
The following information is for a monopoly:
| P | Q | TR | TC | MR | MC |
| 6 | 0 | 1 | |||
| 5 | 1 | 3 | |||
| 4 | 2 | 6 | |||
| 3 | 3 | 10 | |||
| 2 | 4 | 15 | |||
| 1 | 5 | 21 | |||
| 0 | 6 | 28 |
c) What is the "markup"? What is the "markup" equal to for this firm? Explain whether this monopoly market is efficient.
d) What is a natural monopoly? Use a graph to illustrate your answer. Explain why it is difficult to convince a natural monopoly to sell its output at price equal to marginal cost.
Homework Answers
Answer #1
c. Mark Up is the difference between price and the marginal cost of a monopolist. It is a measure of profit for he monopolist.
Mark Up = P - MC = 4-3 = 1
Monopoly market is not efficient because it does not produces at the minimum average cost of production.
d. A natural monopoly is a type of monopoly that exists because of the very high fixed cost of installation and economies of scale. Graph is with table.
Marginal cost pricing accrues losses to a monopolist who wants to earn positive economic profits. Therefore a monopolist produces at the point where marginal revenue equals marginal cost but P = Demand curve.
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