Why is the demand curve facing a monopolist downward sloping

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Discussion Post: Ace Manufacturing

Ace Manufacturing produces 1,000 hammers per day. The total fixed cost for the plant is $5,000 per day, and the total variable cost is $15,000 per day. Calculate the average fixed cost, average variable cost, average total cost, and total cost at the current output level.

For mathematically-minded students, what is the algebraic relationship between the equation for output and the equation for marginal product in Exhibit 2 of Chapter 7? Explain the circumstances under which the long-run supply curve for an industry is a horizontal line. Next, explain the circumstances under which the long-run supply curve for an industry is an upward-sloping line.

• Does a Kansas wheat farmer operate in a perfectly competitive market structure? Explain.

1. Consider this statement: "A firm should increase output when it makes a profit." Do you agree or disagree? Explain.

• Suppose a perfectly competitive firm's demand curve is below its average total cost curve. Explain the conditions under which a firm continues to produce in the short run.

2. Suppose independent truckers operate in a perfectly, competitive constant-cost industry. If these firms are earning positive economic profits, what happens in the long run to the following: the price of trucking services, the industry quantity of output, and the profits of trucking firms?

• Why is the demand curve facing a monopolist downward sloping, while the demand curve facing a perfectly competitive firm is horizontal?

3. Explain why you agree or disagree with the following statements:

• "All monopolies are created by the government."

• "The monopolist charges the highest possible price."

• "The monopolist never takes a loss."

4. Explain why a monopolist would never produce in the inelastic range of the demand curve.

• Suppose the demand and cost curves for a monopolist are as shown in Exhibit 10 in Chapter 9. Explain what price the monopolist should charge and how much output it should produce.

Reference no: EM133488440

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