1. The diagram below represents a Monopoly firm in equilibrium - Leaving Cert Economics - Question 1 - 2017
Question 1
1. The diagram below represents a Monopoly firm in equilibrium.
(a)
(i) Write out what each of the six underlined labels represents.
(ii) The firm is in equilibrium... show full transcript
Worked Solution & Example Answer:1. The diagram below represents a Monopoly firm in equilibrium - Leaving Cert Economics - Question 1 - 2017
Step 1
Copy the diagram into your answer book.
96%
114 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
The diagram should be copied as provided, showing the curves for MC, AC, MR, and AR with the equilibrium point G at quantity Q1.
Step 2
Write out what each of the six underlined labels represents.
99%
104 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
P / C - Price / Cost
Q - Quantity
AC - Average Cost
AR - Average Revenue
MC - Marginal Cost
MR - Marginal Revenue
Step 3
The firm is in equilibrium at point G and produces output Q1. Show on your diagram:
- The price the firm will charge for Q1. (use label P1)
96%
101 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
At equilibrium point G, the firm will charge a price represented by label P1, which corresponds to the average revenue at that output level.
Step 4
- The average cost of producing this output. (use label C1)
98%
120 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
The average cost of producing output Q1 will be indicated by label C1, where the line AC intersects at Q1.
Step 5
State three possible barriers to entry.
97%
117 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
Legal/state restrictions
Ownership of a Patent / Copyright
Trade Agreements & Collusion
Step 6
Write brief notes on each of these.
97%
121 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
Legal/state restrictions: Governments may grant exclusive rights to firms to supply goods or services, creating restrictions.
Ownership of a Patent/Copyright: A patent allows only one firm to produce a specific product, restricting competition.
Trade Agreements & Collusion: Firms may collude, agreeing not to compete in certain markets to maintain monopolistic power.
Step 7
State and explain one reason why some services provided by the above companies are not provided by private entrepreneurs.
96%
114 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
Loss making services: Some services offered by state-owned enterprises may be unprofitable, making them unattractive for private entrepreneurs. For example, rural bus routes that do not generate sufficient revenue.
Step 8
State and explain two possible measures these state-owned companies could take to try to reduce their losses.
99%
104 rated
Only available for registered users.
Sign up now to view full answer, or log in if you already have an account!
Answer
Decrease wage costs/pensions: By cutting wages, the companies can lower their expenditure.
Increase revenue/efficiency: Improving the efficiency of service delivery or finding new revenue streams can help offset losses.
Join the Leaving Cert students using SimpleStudy...
