1. How does the profit maximization condition for a monopoly differ from that for a perfectly competitive firm? How does this difference impact efficiency under each market structure?
2. A perfectly competitive firm has the following fixed and variable costs in the short-run. The market price for the firm's product is $140.
Output FC VC TC TR Profit/Loss
0 $90 $0 90 0 (90)
1 90 90 180 140 (40)
2 90 170 260 280 20
3 90 290 380 420 40
4 90 430 520 560 40
5 90 590 680 720 20
6 90 770 860 840 (20)
a. Complete the table.
b. What level of output should the firm produce to maximize profits?
c. Assume this firm is making a loss when it produces its 7th unit of output. What should the firm do in the short-run?
3. The following table provides market share information about the soft-drink industry.
Company
Market Share
Coca-Cola
37%
Pepsi-Co
35%
Cadbury Schweppes
17%
Other
11%
a. Do you think the Department of Justice and the Federal Trade Commission would approve a merger between any two of the first three companies listed? Explain.
b. Do you think this market has barriers to entry? If so, what might they be?
1. How does the profit maximization condition for a monopoly differ from that for a perfectly competitive firm? How does this difference impact efficiency under each market structure?
2. A perfectly competitive firm has the following fixed and variable costs in the short-run. The market price for the firm's product is $140.
Output FC VC TC TR Profit/Loss
0 $90 $0 90 0 (90)
1 90 90 180 140 (40)
2 90 170 260 280 20
3 90 290 380 420 40
4 90 430 520 560 40
5 90 590 680 720 20
6 90 770 860 840 (20)
a. Complete the table.
b. What level of output should the firm produce to maximize profits?
c. Assume this firm is making a loss when it produces its 7th unit of output. What should the firm do in the short-run?
3. The following table provides market share information about the soft-drink industry.
| Company | Market Share |
| Coca-Cola | 37% |
| Pepsi-Co | 35% |
| Cadbury Schweppes | 17% |
| Other | 11% |
a. Do you think the Department of Justice and the Federal Trade Commission would approve a merger between any two of the first three companies listed? Explain.
b. Do you think this market has barriers to entry? If so, what might they be?
Related textbook solutions
Related questions
Assume that a firm in a perfectly competitive market can sell its product for $35 (ie price per unit of output). Furthermore, it faces the following costs:
| Output (Q) | Total Cost |
| 0 | 25 |
| 1 | 50 |
| 2 | 100 |
| 3 | 120 |
| 4 | 155 |
| 5 | 190 |
| 6 | 250 |
| 7 | 390 |
a) Calculate Total revenue (TR), Marginal Cost (MC), Fixed Cost (FC), Variable cost (VC), and Average Cost (AC).
b) What is the profit-maximizing output level?
c) Is this firm is making a profit or loss at the profit-maximizing output level? Explain.
d) Do you think the firm will continue its production in the short run?
e) What will be the long-run price in this market?
