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Make the best case you can that this ad is not improving the efficiency of the allocation of the economies resources.

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  1. What is your name?
  2. Sketch a graph for a monopoly that is earning economic profit.
    1. Label the axes.
    2. The profit maximizing price is $100
    3. The profit maximizing quantity is 50
    4. Show the demand, marginal revenue, marginal cost, and average total cost curves facing the firm.
    5. Shade the area that equals the firm’s profit.
    6. Identify the socially efficient quantity on the graph.
    7. Shade the area that equals the deadweight loss.

 

Tables A and B contain demand and cost information.Visit Blackboard / My Grades / L19-IA, X to learn whether Table A or in Table B applies to your firm. Use the information to answer the remaining questions.

 

Table A

Q P ATC MC
10 260 150 115
11 258 147.91 127
12 256 147.17 139
13 254 147.46 151
14 252 148.57 163
15 250 150.33 175
16 248 152.63 187
17 246 155.35 199
18 244 158.44 211
19 242 161.84 223
20 240 165.50 235
21 238 169.38 247
22 236 173.45 259
23 234 177.70 271
24 232 182.08 283

 

Table B

Q P ATC MC
10 270 150 115
11 268 147.91 127
12 266 147.17 139
13 264 147.46 151
14 262 148.57 163
15 260 150.33 175
16 258 152.63 187
17 256 155.35 199
18 254 158.44 211
19 252 161.84 223
20 250 165.50 235
21 248 169.38 247
22 246 173.45 259
23 244 177.70 271
24 242 182.08 283

  1. What quantity minimizes average total cost? Quantity = _____
  2. What quantity maximizes profit? Quantity = a =______
  3. What price maximizes profit? Price = $_____
  4. What is the maximum profit? Profit = $_____
  5. What is marginal cost when quantity = a, your answer in question 4?

    MC = $_____

  6. What is the socially efficient quantity? Q = ___

What is the deadweight loss when the firm maximizes profit?

Deadweight loss = $____

 

9.Name a product you purchased recently from a store in Richmond. _________

 

  1. Does the store operate in a monopolistically competitive industry?
    1. Yes
    2. No
  1. Describe how the industry meets or fails to meet each of the characteristics of monopolistic competition.

 

 

Watch this ad for Codfish sandwich.

 

  1. Make the best case you can that this ad is not improving the efficiency of the allocation of the economies resources.

 

  1. Make the best case you can that this ad is improving the efficiency of the allocation of the economies resources.

 

  1. Which argument do you find most compelling? Why?