The DeBeers Company is a profit-maximizing monopolist that exercises monopoly po

Question

The DeBeers Company is a profit-maximizing monopolist that exercises monopoly power in the distribution of diamonds. If the company earns positive economic profits this year, then the price of diamonds will: be equal to the marginal cost of diamonds. be equal to the average total cost of diamonds. exceed the marginal cost of diamonds but be equal to the average total cost of diamonds. exceed both the marginal cost and the average total cost of diamonds. A natural monopoly: has an average total cost curve that reaches minimum possible average total cost at a low level of output. is usually subject to antitrust suits. is usually allowed to choose its price so as to maximize profits in the United States. occurs when a single firm can supply the entire market demand for a product at a lower average total cost than would be possible if two or more firms supplied the market. If MC = Q/15 represents marginal cost for a monopolist and market demand is given by Qd = 500 - 10P, then the monopolist maximizes profit by producing: 187.5 units of output. 250 units of output. 300 units of output. 500 units of output.

Explanation / Answer

8. D because marginal revenue is lower than the price in monopoly 9. C 10.A P=50-Qd/10 MR=50-Q/5 MR=MC 50-Q/5=Q/15 Q=187.5

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