Download micro written assignment answers

MICRO WRITTEN ASSIGNMENT ANSWERS
Spring 2015
The answers to the Homework Assignments are in RED. I believe these
answers will help you study for the exam. If you have questions after going
over the answers, please email me in ANGEL.
Assignment # 9
 Page 263, # 2. Why is the demand curve facing a monopolist downward sloping
while the demand curve facing a perfectly competitive firm is horizontal? Do not just
cut and paste the answer from the book; put the answer in your own words.
You will need a good understanding of Perfect Competition from the last chapter and
of Monopoly from this chapter. The key to this answer is on page 247-248. Keep in
mind that this has to do with what the Monopolist has to do with the selling price if the
Monopolist wants to sell more. Please give me a complete answer.
Refer to chapter 8, Exhibit 1 page 215.
A firm operating in a perfectly competitive market
structure is a “price taker”. The price is set by supply
and demand in the market. The market equilibrium
price becomes the demand curve for the perfect
competitor. This horizontal demand curve is perfectly
elastic. The perfect competitor can sell as much as it
wants at that price, but if the firm raises the price, it
will not sell any.
Refer to chapter 9, Exhibit 2 page 247.
We can see that the demand curve facing the
Monopolist is not horizontal but downward sloping.
If the monopolist offers a certain price in the market
Place, it will sell a certain quantity of product at that
price. If the monopolist wants to sell more product it
must lower the price. This is why the demand curve for
a monopolist is downward sloping.
We will find in this chapter that the monopolist will not
charge the highest price it can, it will charge the price
at which it will make the most profit.
Summary: If the Monopolist wants to sell more quantity they have to lower the price on all items to
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get more people to buy. This means that the additional revenue on the next item sold MR
(Marginal Revenue) will be less than the additional revenue on the previous item sold. This means
that the MR will not be the same for additional quantities sold. Since the MR gets less and less as
more quantities are offered and sold the curve slopes down unlike in Perfect Competition where it
stay level. And this also means that the Marginal Revenue is different than the Price people are
willing to pay (the Demand Curve). So in Monopoly the MR curve and the D (Demand) curve are
not the same curve.
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