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20SP ECON 215
Dr. Danko Tarabar
Weeks 15-16 homework
Due Thursday, April 23, 2020, at 11:59 PM
Email me directly your Word file at tarabard@winthrop.edu no later than 11:59 PM on April
23rd (Thursday).
1. Which of the following statements is correct?
a. The demand curve facing a competitive firm is horizontal, as is the demand curve
facing a monopolist.
b. The demand curve facing a competitive firm is downward sloping, whereas the demand
curve facing a monopolist is horizontal.
c. The demand curve facing a competitive firm is horizontal, whereas the demand curve
facing a monopolist is downward sloping.
d. The demand curve facing a competitive firm is downward sloping, as is the demand
curve facing a monopolist.
2. If a monopolist can sell 7 units when the price is \$4 and 8 units when the price is \$3, then marginal
revenue of selling the eighth unit is equal to
a. \$3.
b. \$4.
c. \$24.
d. -\$4.
3. For a profit-maximizing monopolist,
a. P > MR = MC.
b. P = MR = MC.
c. P > MR > MC.
d. MR < MC < P.
4. Suppose a monopolist charges a price of \$27 for its product and sells 10 units at that price. At 10 units
of production the firm has average fixed cost equal to \$10 and average variable cost equal to \$12. How
much total profit is the firm earning at this price? (Hint: use AVC and AFC to find ATC. Then, find TC
knowing Q=10).
a. \$5
b. \$25
c. \$50
d. \$140
Page 1 of 3
Table 1
5. Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of \$2
per unit.
Price
\$10
\$8
\$6
\$4
\$2
Quantity
1
2
3
4
5
i. What is the firms optimal Q? ____________
ii. What is the firms TR at this optimal Q? __________
iii. What is the firms TC at this optimal Q? ___________ (hint: if the marginal cost of a single
unit produced is \$2, what is the total cost of X units? 2*X.)
iv. What is the firms profit at this optimal Q? ___________
Figure 1 The figure is drawn for a monopolistically competitive firm.
P
32
24
MC
18
16
Demand
12
8
MR
4
8
12
16
20
24
28
32 Q
6. Refer to Figure 1. This firms total cost (TC) is ______*______ = _________, and total revenue is
______*_______ = _________. (Fill in the blanks with appropriate values.)
Page 2 of 3
Figure 2
The figure is drawn for a monopolistically-competitive firm.
Price
MC
140
123.33
ATC
Demand
90
56.67
MR
100
133.33
Quantity
7. Refer to Figure 2. Is this monopolistically competitive firm in its short-run or in its long-run
equilibrium? How do you know? Explain your reasoning in 1-2 sentences.
Page 3 of 3