When a competitive market becomes controlled by a monopoly, the price ________ and the output ________.

1. (a) monopoly power: when a company or firm can choose what price to put to a certain good or goods.

(b) revenues= 140x150.000 = 21 million

costs= 60 x150.000 = 9 million

21- 9= 12 million

©(i) Because price is greater than marginal revenue

(ii) They should increase

(iii) It will increase because MR is positive

(iv) The average cost will decrease

(v) Not productively efficient, because AC is bigger than MC and AC is not at minimum

(d) The social community surplus  (cs + ps) is maximized. As long as the price is greater than M

 output should continue to be increased until price equals MC

(e) graph: vertical not necessary labeling

(f)  The level of profits depend on what the other firm does. If Firm B maintains price then Firm A will cut 24 million against the 18 million of Firm B. 

Firm A will cut price no matter what and vice versa.