Suppose the grocery store market in Kansas City is perfectly competitive. Then o

Question

Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others are becomes a single-price4 monopoly. The figure above shows the relevant demand and cost curves. When the market perfectly competitive, the quantity of steak is and when it is a monopoly, the price of a pound of $4; $20 $4; $8 $8; $4 $4; $12 $ 8; $12 Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others are becomes a single-price4 monopoly. The figure above shows the relevant demand and cost curves. When the market perfectly competitive, the quantity of steak is pounds, and when the market is a monopoly, the quantity is pounds. 5,000; 3,000 3,000; 2,000 4,000; 4,000 2,000; 4,000 4,000; less than 2,000 pounds. To be able to price discriminate, a firm must lower prices for all customers. raise prices for all customers be able to identify and separate different types of buyers. Sell a product that can resold. Both answers B and C are correct. Fixed costs are in a natural monopoly, so average total cost as output increases. Nonexistent; decreases large; decreases small; decreases large; increases small; increases If a natural monopoly is regulated using a marginal cost pricing rule, the firm maximizes its profit. an average cost pricing rule, the firm maximizes its profit. an average cost pricing rule, the firm incurs an economic loss. A marginal cost pricing rule, the firm incurs an economic loss. A total cost pricing rule, the firm will exit the industry.

Explanation / Answer

(42) (C)

A perfectly competitive firm will equate Price (Demand) with MC, so price = $8. A monopolist will equate MR with MC, so price = $4.

(43) (B)

When Price = $8, quantity = 3,000 and when price = $4, quantity = 2,000

(44) (C)

(45) (B)

A characteristic of a natural monopoly is that it has very high fixed costs, which prevents entry. High fixed cost makes average total cost fall with increased output.

(46) (D)

A monopolist's price is higher than its MC, so equating price with MC will result in economic loss.

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