State whether you agree or disagree with each of the following statements. Using
ID: 1245050 • Letter: S
Question
State whether you agree or disagree with each of the following statements. Using appropriate diagrams and or equations, explain your response.a. Producing output where MC=MR does guarantee that a firm will make a profit.
b. A profit maximizing monopolist must operate on the elastic portion of the demand curve.
c. Since a monopoly is a “bad” thing for consumers but a “good” thing for producers, on balance, we cannot be sure that monopoly is responsible for any loos in economic efficiency.
d. A price-discriminating monopolist will charge a higher price in the market where demand is less elastic.
Explanation / Answer
a. Producing output where MC=MR does guarantee that a firm will make a profit. FALSE: Sufficiently high fixed costs could make production at that level infeasible. b. A profit maximizing monopolist must operate on the elastic portion of the demand curve. Not sure about this one. c. Since a monopoly is a “bad” thing for consumers but a “good” thing for producers, on balance, we cannot be sure that monopoly is responsible for any loss in economic efficiency. False: (Discuss deadweight loss, and how the perfectly competitive atmosphere minimizes it whereas monopolies create deadweight loss) d. A price-discriminating monopolist will charge a higher price in the market where demand is less elastic. Not sure about this one, but my gut says yes. The key here is price discriminating. Hope this helps at all
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