Question

Table: Lunch

Price	Quantity Demanded
$10	0
$9	10
$8	20
$7	30
$6	40
$5	50
$4	60

Reference: Ref 13-7 Table: Lunch

(Table: Lunch) Use Table: Lunch. This table shows market demand for picnic lunches for people taking all-day rafting trips on the river. Suppose that the marginal cost and average cost of each lunch are a constant $4 for all firms in the market. If Joe owns one of many firms in a competitive industry, what price will he charge for a lunch in the long run?

Select one:

a. $4

b. $6

c. $8

d. $10

Table: Lunch

Price	Quantity Demanded
$10	0
$9	10
$8	20
$7	30
$6	40
$5	50
$4	60

Reference: Ref 13-7 Table: Lunch

(Table: Lunch) Use Table: Lunch. This table shows market demand for picnic lunches for people taking all-day rafting trips on the river. Joe has a firm providing this service, and his marginal cost and average cost for each lunch are a constant $4. If Joe is a monopolist, how many lunches will he produce in the long run?

Select one:

a. 20

b. 30

c. 0

d. 10

Answer 1

1. In long run, A perfectly competitive profit maximizing firm produces at the point such that at profit maximizing quantity, price = AC (So that, total revenue = total cost and the firm breaks even). As for this firm, MC = AC = $4, therefore in long run, Joe will charge $4 for a lunch.

Answer: option A

2. A profit maximizing monopoly firm produces at the point where MR = MC and sets it's profit maximizing price at the point where profit maximizing quantity lies on the demand curve. As it's a monopolist, therefore it will earn positive profit even in long run.