Consider a monopoly where consumers are currently consuming where the marginal utility is 10 units of utility for the good. The price of the product is $5. The marginal cost of producing the good is $2.00. Then consider perfectly competitive firms where consumers are currently consuming where the marginal utility is 20 units of utility for the perfectly competitive product. The price of the product is $10. At current production levels, the marginal cost of producing the good is $10.

Required:
a. Calculate the marginal utility per dollar spent by consumers in a monopolistic industry.
b. Calculate the consumer marginal utility per dollar of marginal cost for the monopoly.

Respuesta :

Answer and Explanation:

a. The marginal utility per dollar spent  in a monopolistic industry is

= Marginal utility ÷ Price

= 10 ÷ 5

= 2 utils per dollar

b. The consumer marginal utility per dollar for the monopoly is

= Marginal utility ÷ Marginal cost

= 10 ÷ 2

= 5 utils per dollar

hence by using the above formulas, the above answers should be considered

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