Question 2 (Page 224)
a) Average variable costs
b) Shut down and exit the industry
c) Reduce
d) Equal; maximized
e) Greater than; increase

Question 4 (Page 251)
a) For any firm, profits are maximized at that level of output where marginal revenue equals marginal cost. In the diagram, MR equals MC at output of Q0. At this level of output, the monopolist charges the price p4.
b) Profits per unit are equal to price minus average total cost. Thus the profits are the rectangle defined by the point’s p2p4BC. Since price exceeds average total cost, the monopolist’s profits are positive.

Assignment 4

Natasha Xavier Muthu

43147

Yorkville University
Introduction to Economics for Managers – Busi 1023
Rossie Kadiyska
February 2, 2014

Question 2 (Page 224)
a) Average variable costs
b) Shut down and exit the industry
c) Reduce
d) Equal; maximized
e) Greater than; increase

Question 4 (Page 251)
a) For any firm, profits are maximized at that level of output where marginal revenue equals marginal cost. In the diagram, MR equals MC at output of Q0. At this level of output, the monopolist charges the price p4.
b) Profits per unit are equal to price minus average total cost. Thus the profits are the rectangle defined by the point’s p2p4BC. Since price exceeds average total cost, the monopolist’s profits are positive.
c) Consumer surplus is the triangle defined by the point’s p4AB. As always, it is the area below the demand curve and