ECO100Y5 Lecture Notes - Lecture 5: Price Discrimination, Average Variable Cost, Marginal Revenue

23 views3 pages

tealspider601

2 Sep 2016

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

sophiapham192 and 37296 others unlocked

ECO100Y5 Full Course Notes

Verified Note

53 documents

Document Summary

Monopolist: a firm that is the only seller in the market. Monopolist"s demand curve is the market demand curve for that product. Their demand curve is a negatively sloped demand curve. In order for a monopoly to increase sales, they have to reduce the price. Average revenue is the demand curve of the monopoly. Marginal revenue is less than price because the price must be reduced on all units in order to sell an additional unit. The mr curve is below the demand curve. Marginal revenue is positive when demand is elastic, and negative when demand is inelastic. The monopolist will operate in the elastic portion of the demand curve. Rule 1: the firm shouldn"t produce at all unless price (average revenue) exceeds average variable cost. Rule 2: if the firm does produce, it should produce a level of output such that marginal revenue = marginal cost.

Related Questions

8. SMC always passes through the

a. minimum of both short run total cost curve and short run variable cost curve.

b. minimum of both short run average cost curve and short run average variable cost curve.

c. minimum of the long run average curve.

d. minimum of the short run average cost curve only.

9. In the first-degree price discrimination consumer surplus is

a. determined by elasticity of demand.

b. determined by the difference between P and MR

c. determined by area under the demand curve minus price.

d. zero.

10. A price taker firm faces a

a. perfectly elastic demand curve

b. declining marginal revenue

c. perfectly elastic supply curve

d. declining market demand curve

11. For a discriminating monopolist, the price is usually

a. higher in the market which has elastic demand

b. higher in the market which has inelastic demand.

c. lower in the market which has inelastic demand

d. higher in the market which as higher marginal revenue.

12. At the point of inflection on the total cost curve.

a. marginal and average costs are equal.

b. marginal cost is maximum.

c. marginal cost is minimum.

d. average cost is minimum.

e. marginal product is minimum.

13. A discriminating monopolist must allocate output by the law of

a. equi-marginal utility c. equi-marginal productivity

b. equi-marginal revenue d. equi-marginal cost

byzantiumsalmon293

1. Which of the following is true under a monopoly?

A. Monopolist chooses the highest possible price.
B. Monopolist chooses a price that is always higher than marginal cost of production.
C. Marginal revenue of a monopolist is price.
D. None of the above are true for monopoly.

2. You are the manager of a monopoly that faces a demand curve described by P = 230 -20Q. Your costs are C = 5 +30Q. The profit-maximizing output for your firm is:

A. 4
B. 5
C. 6
D. 7

3. Which of the following is true?

A. A monopolist produces on the inelastic portion of its demand.
B. A monopolist always earns an economic profit.
C. The more inelastic the demand, the closer marginal revenue is to price.
D. In the short run a monopoly will shutdown if P < AVC.

4. In a competitive industry with identical firms, long rum equilibrium is characterized by:

A. P = AC
B. P = MC
C. MR = MC
D. All of the above

5. You are the manager of a firm that sells its product in a competitive market at a price of $50. Your firm's cost function is C = 40 + 5Q². Your firm's maximum profits are:

A. 125
B. 250
C. 100
D. 85

6. A perfectly competitive firm faces:

A. A perfectly elastic demand function
B. A perfectly inelastic demand function
C. a demand function with unitary elasticity
D. none of the above

purpleworm770

(TCO 3) The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why (Points : 3)

there are barriers to entry in pure monopoly.
a monopoly has a perfectly elastic demand curve.
marginal revenue is less than average revenue.
total revenues are greater than total costs at the profit-maximizing level of output.

emeraldlizard707

ECO100Y5 Lecture Notes - Lecture 5: Price Discrimination, Average Variable Cost, Marginal Revenue

ECO100Y5 Full Course Notes

Document Summary

Get access

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related Documents

ECO100Y5 Chapter Notes - Chapter 10,12,16,17: Market Power, American Recovery And Reinvestment Act Of 2009, Natural Monopoly

ECO100Y5 Lecture : 10 Monopoly.doc

ECO100Y5 Lecture Notes - Lecture 10: Marginal Revenue, Demand Curve, Perfect Competition

Related Questions