Th3.4: Profit Maximising Equilibrium 3 Flashcards
1
Q
Refer to PP
Look at Graph 39. The demand curve for a monopolist will be…
A
the demand curve - it will be downwards sloping, since even though the firm is a monopolist, people can still choose whether to buy the good or not
2
Q
Refer to PP
Look at Graph 39. Where will they produce at?
A
profit maximising is at MR = MC so this is the output they will produce at - they produce Q1 at P1 and make supernormal profit of the shaded area
3
Q
Refer to PP
Look at Graph 39. Since there is a monopoly, the firm may be able to…
A
earn supernormal profits or loss in the long run as there is no freedom of entry and exit to the market
