5) True – False- Uncertain - Do any 4 of a-e. One word answers will not receive

Question

5)         True – False- Uncertain - Do any 4 of a-e. One word answers will not receive full credit

a)         Perfect competition is identified as the most efficient form of market organization because it maximizes consumer surplus and minimizes producer surplus.

b)         If a monopolist is producing a quantity such that marginal revenue is lower than marginal cost, the monopolist should produce a smaller quantity.

c)         Monopolists practice price discrimination, which is legal, because of prejudice against certain groups.

d)         In the long run, a firm in a monopolistically competitive industry will produce at the quantity of output where the minimum point on its short run average total cost curve is tangent to its demand curve.

e)         Cartels tend to be stable and long lasting organizations and earn above normal profit.

4) True – False- Uncertain - Do any 4 of a-e. One word answers will not receive full credit a) Perfect competition is identified as the most efficient form of market organization because it maximizes consumer surplus and minimizes producer surplus. b) If a monopolist is producing a quantity such that marginal revenue is lower than marginal cost, the monopolist should produce a smaller quantity. c) Monopolists practice price discrimination, which is legal, because of prejudice against certain groups. d) In the long run, a firm in a monopolistically competitive industry will produce at the quantity of output where the minimum point on its short run average total cost curve is tangent to its demand curve. e) Cartels tend to be stable and long lasting organizations and earn above normal profit.

Explanation / Answer

5) a) True perfect competitiom maximises total surplus because marginal cost for last unit is equal to willingness to pay

B)True. When MR<MC then firm should produce less upto the point where MR=MC

C)True. An eg are different price for flight tickets for senior citizen and young citizen.

D)false because demand is tangent to SRATC but not at SRATC min.

E) Uncertain. Normally few dirms cartel arr stable and large firm should contribute to form cartel but normally is destable.

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