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The diagram below represents the long run equilibrium of a firm in Monopoly - Leaving Cert Economics - Question 2 - 2018
Question 2
The diagram below represents the long run equilibrium of a firm in Monopoly. (i) Write in words the full label (not abbreviations) for each of the lines numbered 1 ... show full transcript
Worked Solution & Example Answer:The diagram below represents the long run equilibrium of a firm in Monopoly - Leaving Cert Economics - Question 2 - 2018
Step 1
Write in words the full label (not abbreviations) for each of the lines numbered 1 to 3.
Answer
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Marginal Cost: This line represents the additional cost incurred by producing one more unit of output, which is crucial for firms to determine the optimal production level in a monopoly market.
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Average Cost: This line shows the total cost per unit of output, which helps to explain the firm's pricing strategy and profit maximization.
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Average Revenue: This represents the average revenue per unit sold, which is critical in understanding the demand curve faced by a monopolist.
Step 2