Single Monopolist Question (Check My Work)?

Question

Wanda's Widgets is a single-price monopolist (a monopolist that does not price discriminate). Assume that Wanda's marginal cost is constant at $40, and that she faces the marginal cost, marginal revenue, and demand shown in the graph below. She has no fixed cost.

http://courses.aplia.com/problemsetassets/textbooks/arnold_micro_8e/ch21_II/6_static_graph.gif

#1 - As a single-price monopolist, Wanda maximizes her profits by producing _____ widgets at a price of ____ each.

A. Five; $50

B. Four; $40

C. Three; $70

D. Seven; $30

My Answer is C

#2 - As firms enter, the market for widgets becomes perfectly competitive. Now the entire industry faces the conditions shown in the graph above. This industry will produce a total of _____ widgets at the perfectly competitive price of ____ each.

A. Five; $50

B. Six; $40

C. Four; $60

D. Four; $30

My Answer is B

Answer 1

#1

C. Three; $70 (MR=MC and go up to the demand curve to get relevant price)

#2

B. Six; $40 (MC=Demand)

#3

C. $45 (3x30)/2=90/2=45

#4

B. There are substantial economies of scale in the production of widgets, so Wanda's Widgets can produce widgets at a lower cost than a competitive firm could. - this is due to specialization effect (so lower costs may be achieved) , and this one is the only best-fit answer from given list.

"A" is false because total surplus remain unchanged (the difference is only who gets it)

"C" - not always works.