1. When a monopoly charges a higher price, fewer of its goods are sold. A) True
ID: 1250821 • Letter: 1
Question
1.
When a monopoly charges a higher price, fewer of its goods are sold.
A) True
B) False
2.
A firm can price discriminate if it operates in a competitive market.
A) True
B) False
3.
Declining average total cost with increased production is one of the defining characteristics of a natural monopoly.
A) True
B) False
4.
In a natural monopoly,if the government requires marginal cost pricing, it must pay the monopolist a subsidy.
A) True
B) False
5.
A discriminating monopolist will produce a larger output than a non-discriminating monopolist.
A) True
B) False
6.
By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profit.
A) True
B) False
7.
For a monopoly, marginal revenue is often greater than the price they charge for their good.
A) True
B) False
8.
A monopoly that engages in perfect price discrimination produces as much as a firm in perfect competition
A) True
B) False
9.
The monopolist is a price maker
A) True
B) False
10.
A monopolist will always pick a price in the elastic region of the demand curve
A) True
B) False
Explanation / Answer
In the future, it would be great if you could ask a single question or maybe three short questions at a time. 1. When a monopoly charges a higher price, fewer of its goods are sold. A) True ; Demand curves are downward sloping. Higher price implies lower quantity. 2. A firm can price discriminate if it operates in a competitive market. B) False ; prince discrimination is impossible because competing firms will charge a lower price and the competitive equilibrium price will converge to marginal cost. 3. Declining average total cost with increased production is one of the defining characteristics of a natural monopoly. A) True ; This is called increasing returns to scale or economies of scale. 4. In a natural monopoly,if the government requires marginal cost pricing, it must pay the monopolist a subsidy. A) True ; Otherwise the monopoly will suffer an economic loss and go out of business since the average total cost is above the marginal cost at all relevant quantities. 5. A discriminating monopolist will produce a larger output than a non-discriminating monopolist. A) True ; Price discrimination allows a monopolist to sell to people they otherwise wouldn't sell to. That is, they can lower their price just for them and not everyone else. 6. By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profit. B) False ; In order for a practice to be considered price-discrimination, the marginal cost of production has to be the same. The marginal cost of producing hard-cover books is larger than the marginal cost of producing paper-back books. So, while there may be different consumer groups with different elasticities of demand (characteristic of third-degree price discrimination), we don't necessarily know that price-discrimination is occurring because the marginal costs are not the same. 7. For a monopoly, marginal revenue is often greater than the price they charge for their good. B) False ; Price is greater than marginal revenue for monopolies. 8. A monopoly that engages in perfect price discrimination produces as much as a firm in perfect competition A) True ; The quantities produced are the same but each individual pays his or her reservation price under perfect price discrimination. 9. The monopolist is a price maker A) True ; The rational monopolist prices such that marginal revenue equals marginal cost. But a monopolist could set another price if it chose to. 10. A monopolist will always pick a price in the elastic region of the demand curve A) True ; E = dQ/dP * P/Q If a monopolist faces a zero marginal cost, it maximizes profit by maximizing revenue. This implies that it prices such that elasticity is equal to 1. If it faces a positive marginal cost, then it will price higher and produce a lower quantity. This implies that it prices such that elasticity is greater than 1. It will never price such that elasticity is less than 1 because it cannot face a negative marginal cost. Therefore, a monopolist will always price in the elastic region of the demand curve.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.