7) Assume that the dairy industry is initially in a perfectly competitive equilibrium. Assume that, in the long run, the technology is such that average cost is constant at all levels of output. Suppose that producers agree to form an association and behave as a profit- maximizing monopolist. Explain clearly in a diagram the effects on (a) market price, (b) equilibrium output, (c) economic profit, (d) consumer surplus, and (e) efficiency.

7) Assume that the dairy industry is initially in a perfectly competitive equilibrium. Assume that, in the long run, the technology is such that average cost is constant at all levels of output. Suppose that producers agree to form an association and behave as a profit- maximizing monopolist. Explain clearly in a diagram the effects on (a) market price, (b) equilibrium output, (c) economic profit, (d) consumer surplus, and (e) efficiency.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Monopoly

Section: Chapter Questions

Problem 6PA

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