EC 201 Student Name:_____________________EC 201 Student Name:_____________________California State Polytechnic University, PomonaDr. BresnockFall, 2004Computer Project = Monopoly Module Assignment (50 points) Due: Dec. 1st (in class)Please limit your answers to the spaces provided. If necessary, write on the back of the page. Donot attach printout or additional pages. All questions pertain to the Monopoly module in theSimEcon® software package. Make sure that you have read the “Monopoly Manual” and “SimEcon® OperationInstructions”. These materials may be found at the Class Web site prior to beginning theassignment. For many of the assignment’s questions, it will be necessary to refer to thoseinstructions. For many of the assignment’s questions, it will be necessary to refer to your text.Open the Monopoly module of SimEcon©. Write down the initial conditions below:Total Revenue: __________ Price: __________Total Cost: __________ Marginal Revenue: __________Total Profit: __________ Marginal Cost: __________Average Total Cost: __________Is the above monopolist maximizing profit? __________ (Yes, No). Why or why not?______________________________. Should this monopolist increase production, decreaseproduction, or leave output unchanged? _________________________. Note that the price is greater than marginal revenue. Is this always the case with a monopolist?_______________ (Yes, No). Why or why not?_____________________________________________________________________________________________________________________Must the monopolist always be earning an economic profit? __________ (Yes, No). Why orwhy not? ____________________________________________________________________________________________________________________________________________________Click “Continue”. Set the monopolist’s fixed costs at $300,000 throughout the entireassignment. Click “Make Decisions”. Set the output level equal to 2,000,000 units. Click “SeeResults”. Fill in the table below:Total Revenue: __________ Price: __________Total Cost: __________ Marginal Revenue: __________Total Profit: __________ Marginal Cost: __________Average Total Cost: __________What has happened to profit compared to the last example? _______________. Do you thinkthat increasing production compared to the last example was a wise decision? __________ (Yes,No). Is the above monopolist maximizing profit? __________ (Yes, No).Principles of Economics Page 2Monopoly Module AssignmentWhy or why not? _________________________________________________________.Should this monopolist increase production, decrease production, or leave output unchanged?_____________________________________________________________________________.What principle/s, how does the monopolist use in order to maximize profits (or minimizelosses)? _______________________________________________________________________Click “See Graph”, and draw the resulting graph that you see below. Indicate the monopolist’scurrent level of production (Q*) and the profit maximizing level of production (QE).Click the “Back” button once. You will return to the second table of this assignment. Click“New Output” and select an output of 6,000,000 units. Fill in the table below.Total Revenue: __________ Price: __________Total Cost: __________ Marginal Revenue: __________Total Profit: __________ Marginal Cost: __________Average Total Cost: __________Comparing this table with an output level of 2,000,000 units, which output level has the highertotal cost? ____________. Which output level has the higher profit? ____________. Whichproduction level has the lower average cost? ____________. Does the output level with lowertotal costs have to be the output level with the higher profit? __________ (Yes, No). Why orwhy not? ______________________________________________________________. Is the above monopolist (6,000,000 units) maximizing profit? __________. Why or why not?___________________________________________________________________. Should thismonopolist increase production, decrease production, or leave output unchanged? ____________Click “New Output”. Select an output level of 14,000,000 units. Click “See Results”. Fill in thetable below.Total Revenue: __________ Price: __________Total Cost: __________ Marginal Revenue: __________Total Profit: __________ Marginal Cost: __________Average Total Cost: __________Principles of Economics Page 3Monopoly Module AssignmentIs the above monopolist (14,000 units) maximizing profit? __________ (Yes, No). Why or whynot? ________________________________________. Should this monopolist increaseproduction, decrease production, or leave output unchanged? __________________________. Click “See Graph”, and draw the resulting graph below. Indicate the current (Q*) and profitmaximizing (QE) levels of output.Given your answers for the output levels of 6,000,000 units and 14,000,000 units, do you thinkthe profit maximizing output will be (< 6,000,000; between 6,000,000 and14,000,000; >14,000,000). At the output of 10,000,000, what is the per unit profit? . What is the total profit atthis level of output? . At the output of 11,000,000, what is the per unit profit? . What is the total profit at this level of output? . (For these total profitfigures, report the screen results. Manual calculations will differ slightly from the screen resultsdue to rounding that is internal to the module).Now select the output of 10,000,000, select “Results”, and then choose “Regulate”. Select the“Regulate Price” option. Fill in the table below. Regulation Item Your Monopoly* Average Cost Pricing Marginal Cost PricingPrice ____________ ______________ _ ________________ _Output ____________ _____________ __ ________________ _Profit ____________ _______________ _-_______________ **(* = “Your Monopoly” shows the unregulated monopoly pricing results.)( ** = This entry should be a minus. This is a module glitch.)Which pricing scheme generates the most output? ____________________. Which pricingscheme results in the lowest price? ____________________. Which pricing scheme