4 1. The table below represents the production process for paper for a monopolist Quantity Price Total Marginal Total cost Fixed cost Marginal Cost Revenue Revenue (Per unit) (per unit) 25 25 10 6 2 2 16 32 7 10 2 4 3 12 36 14 8 32 14 18 2 5 3 15 -17 22 4 4 NNNN 4 4 4 What is the optimal amount of paper that she must produce? ay 1 b) 2 c) 3 d) 4 e) 5 2. What is the equilibrium profit? a) $14 b) $19 c) $22 d) $0 bn 3. In a monopolistic competition, we know that: 1) AC = n*+c and 2) P = c + Assume that: c = 2, F = 5.5 = 20, b = . Here, AC is average cost, c is marginal cost, F is fixed cost and S is total sales. What is the equilibrium price (p) and number of firms (n)? (Hint: Solve the two equations simultaneously two find n and p. Recall that in equilibrium price equals average cost) a) p = $1 and n = 2 b) p = $2 and n = 2 c) p = $3 and n = 4 d) p = $4 and n = 4