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
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