The next question is based on the demand and cost data for a pure monopoly given in the table below. Output Price Total Cost0 $500 $2501 300 2602 250 2903 200 3504 150 5005 100 680 If the pure monopoly were forced to produce the allocatively efficient level of output through the imposition of a price ceiling, the price would have to be set atMultiple Choice$100.$150.$200.$250.
Question
The next question is based on the demand and cost data for a pure monopoly given in the table below. Output Price Total Cost0 2501 300 2602 250 2903 200 3504 150 5005 100 680 If the pure monopoly were forced to produce the allocatively efficient level of output through the imposition of a price ceiling, the price would have to be set atMultiple Choice150.250.
Solution
To find the allocatively efficient level of output, we need to find where the price equals the marginal cost. The marginal cost is the change in total cost divided by the change in quantity.
Let's calculate the marginal cost for each level of output:
- From 0 to 1: (260-250)/1 = $10
- From 1 to 2: (290-260)/1 = $30
- From 2 to 3: (350-290)/1 = $60
- From 3 to 4: (500-350)/1 = $150
- From 4 to 5: (680-500)/1 = $180
Now, we need to find where the price equals the marginal cost. Looking at the prices given, none of them exactly match the marginal costs we calculated. However, the price that comes closest to matching a marginal cost is 180 for the output level from 4 to 5.
Therefore, if the pure monopoly were forced to produce the allocatively efficient level of output through the imposition of a price ceiling, the price would have to be set at $200.
Similar Questions
Answer the next question based on the following demand and cost data faced by a pure monopolist. Demand Data Cost DataPrice Quantity Demanded Output Total Cost$2.75 3 3 $4.002.50 4 4 4.502.25 5 5 4.752.00 6 6 5.751.75 7 7 7.75 The profit-maximizing price for the pure monopoly will beMultiple Choice$2.50.$2.25.$2.00.$1.75.
Use the following table to answer the next question. The table shows the total costs associated with varying levels of output produced by a perfectly competitive firm. Output Total Cost0 $1,4001 1,6002 2,0003 2,6004 3,5005 4,800 If the product sells for $800 a unit, the firm's profit-maximizing output isMultiple Choice2.3.4.
A monopoly produces a level of output where demand is
The table below shows the demand and marginal cost information for a monopolist with a constant marginal cost. Monopoly MarketPrice (dollars) Quantity Demanded Marginal Revenue (dollars) Marginal Cost (dollars)$220 0 — —200 40 $200 $120180 80 160 120160 120 120 120140 160 80 120120 200 40 120100 240 0 120 Instructions: Enter your answers as a whole number. a. For the monopolist, the profit-maximizing price is $ and the profit-maximizing quantity is . b. For the monopolist, the allocatively efficient price is $ and the allocatively efficient quantity is .
For a pure monopoly to sell a quantity of 10 units, the price must be $8. Marginal revenue (MR) at this output level will beMultiple Choice> $8 and < $16.< $8.= $8.> $16.
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