Thursday, May 5, 2016

2003 AP MICRO EXAM (Question 2)

2003 AP MICRO EXAM (Question 2)

(a) Draw a CLG showing a typical monopoly that is maximising profit and indicate each of the following.

 (i) Price
(ii) Quantity
(iii) Profit

Answer - 
(b) Explain the relationship between the demand curve and the MR curve.

The MR curve is below the Demand curve for a monopolist. Monopolists must lower their price to sell more quantity and they loose the revenue on the previous units they would have made at the higher price.

Answer - 

(c) Label each of the following on your graph in part (a)

(i) Consumer surplus
(ii) Deadweight loss

No comments:

Post a Comment