30. If a monopoly firm is earning profits, how much would you expect these profits to be diminished by entry

in the long run?

Problems

31. Return to Figure 9.2. Suppose P0 is $10 and P1 is $11. Suppose a new firm with the same LRAC curve as

the incumbent tries to break into the market by selling 4,000 units of output. Estimate from the graph

what the new firm’s average cost of producing output would be. If the incumbent continues to produce

6,000 units, how much output would the two firms supply to the market? Estimate what would happen to

the market price as a result of the supply of both the incumbent firm and the new entrant. Approximately

how much profit would each firm earn?

32. Draw the demand curve, marginal revenue, and marginal cost curves from Figure 9.6, and identify the

quantity of output the monopoly wishes to supply and the price it will charge. Suppose demand for the
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