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Determining optimal output and price level.

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Please refer attached file for graph

Refer to the given graph of a hypothetical monopolist and answer the following

a. What is the firm's Total Revenue?
b. What is the Total Cost?
c. What is the firm's Total Profits?
d. If the above monopolist were to behave like a perfectly competitive firm (operating in the long run), determine its output.

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Solution Summary

Solution depicts the methodology to find profit maximizing total costs, total revenue and total profits for a monopolist. It also determines the optimal output level for perfectly competitive firm in the long run.

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Please refer attached file for graph

Solution:

a.What is the firm's Total Revenue?
A monopolist sets its output such that MR=MC to maximize its profits.
MC and MR intersect each other at Point G. Price can be determined from demand curve. A vertical ...

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  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
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