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The diagram below represents a Monopoly firm in equilibrium (a) Name each of the curves numbered 1 to 3 - Leaving Cert Economics - Question 8 - 2013
Question 8
The diagram below represents a Monopoly firm in equilibrium (a) Name each of the curves numbered 1 to 3. Use the answer box provided. (b) Show on the diagram the pri... show full transcript
Worked Solution & Example Answer:The diagram below represents a Monopoly firm in equilibrium (a) Name each of the curves numbered 1 to 3 - Leaving Cert Economics - Question 8 - 2013
Step 1
Step 2
Show on the diagram the price the firm will sell at and its average cost of production.
Answer
To determine the price the firm will sell at, locate the point where the Marginal Revenue (Curve 3) intersects with the Marginal Cost (Curve 1). This point establishes the quantity produced, Q1.
From this point, move vertically up to the demand curve (D=AR) to find the market price, P1, at which the firm sells its product.
Additionally, to find the average cost of production, trace horizontally from Q1 to Average Cost (Curve 2) to determine the corresponding average cost level.