Question

g If James's marginal and average costs is $8, and his firm is in a perfectly competitive industry, James's price is $_____ less than if the firm is a monopoly.

Answer 1

Answer:

James's price is $4 less than if the firm is a monopoly. A further explanation is given below.

Explanation:

Marginal income should have been equivalent to the marginal cost expenses as there was a Monopoly. The marginal price is calculated at 8 dollars. That being said, marginal income is declining.

• It costs $15 for maybe the first unit,
• $13 for its second unit,
• $11 for the third unit,
• $9 only for the fourth unit,
• $7 for the fifth unit.

When making the 4th unit, no marginal income as well as marginal cost becomes nearest. It, therefore, means that, as it generates 4 units, the Monopoly price would have been $12. Whether it is a reasonably open market, the cost should always be equivalent to marginal revenue, meaning $8 would be the price.