Which of the following occurs with both perfectly price ...

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Which of the following occurs with both perfectly price discriminating and single-price monopolies?
 
  A) The amount of output is inefficient.
  B) All consumer surplus goes to the monopoly.
  C) Deadweight loss is created.
  D) There is a redistribution of consumer surplus to the monopoly.

Question 2

Jessica is a young doctor who has just started her own practice. Her previous position paid her 80,000 a year. For office space, she uses a building which she owns and which she has rented in the past for 40,000 a year.
 
  Her total revenue from her new practice is 250,000. She pays 50,000 to other firms for materials and supplies, and she pays 40,000 in wages to her office nurse. Assume that Jessica's building and equipment do not depreciate and that her normal profit is 20,000. a) What is the opportunity cost of all factors of production employed by Jessica? b) What is Jessica's economic profit?

[bdobbins]

Answer to Question 1

D

Answer to Question 2

a) Jessica's opportunity costs are: the wages, 40,000; the amount she paid to other firms for material and supplies, 50,000; her forgone wages, 80,000; the forgone rent on her building, 40,000; and, the normal profit, 20,000. The opportunity cost equals the sum of all these costs and so is 230,000.
b) Economic profit equals total revenue minus total opportunity cost, or 250,000 - 230,000 = 20,000.

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TYSM

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