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20 May 2018

79) Now suppose that monopolist is no longer able to perfectly price discriminate. But it determines that an additional new market has emerged, one with the inverse) demand curve and the corresponding marginal revenue curve given by: P=60-9 MR = 60 - 20 If the monopolist succeeds in segmenting the two markets i.e. it prevents arbitrage completely), then it will charge a price equal to in the old market and a price equal to in the new market: A) 60; 30 B) 40; 20 C) 20; 50 D) 20; 40 E ) 40; 40

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Jarrod RobelLv2

21 May 2018

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Related questions

In a perfectly competitive market, in the long run, the marginal cost of a firm becomes equal to its minimum average total cost.

A) True
B) False

Generally, The price a firm charges for its product is equal to its total revenue divided by the number of units sold.

A) True
B) False

In a perfectly competitive firm to maximize profit a firm must make sure that the price it charges does not exceed its marginal cost.

A) True
B) False

Firms in a competitive market can never make economic profits while they may make biasness (accounting) profits.

A) True
B) False

When a perfectly competitive firm is making a positive economic profit its average revenue must be greater than its average total cost.

A) True
B) False

To maximize its profit a firm always produces at the quantity level where it can charge the highest price and earn the greatest revenue; this strategy is consistent with setting is MC equal to price.

A) True
B) False

When a firm in a competitive market is making a positive economic profit its business profit may be positive or negative.

A) True
B) False

In a perfectly competitive market new entries could result in increases in input prices thus making production costs go up.

A) True
B) False

In a perfectly competitive market, in the long run, each firm produces the maximum amount it can produce and charges the lowest price possible. That is why we consider competitive markets efficient.

A) True
B) False

10.

A monopolist always under-produces and charges a price higher than its MC.

A) True
B) False

11.

As the only supplier in the market a monopolist can charge any price it wishes and buyers have no choice but to pay.

A) True
B) False

12.

The marginal revenue is the additional revenue generated by the last unit of labor hired.

A) True
B) False

13.

The price a monopolist charges may or may not be above its average cost but it is always above its MR.

A) True
B) False

14.

When demand curve is a downward-sloping straight line (linear) marginal revenue will be greater than MC at all output leveles.

A) True
B) False

15.

By setting its MR equal to its MC a monopolist determines the output that would maximize its profit.

A) True
B) False

16.

In the long run each competitive firm would produce at the quantity level where its MC is equal to its MR as well as its ATC.

A) True
B) False

17.

A monopoly always makes an economic profit.

A) True
B) False

18.

When a monopoly's ATC is equal to the price it charges it is making normal economic profits.

A) True
B) False

19.

When a monopoly is making a zero economic profit still its MR>ATC.

A) True
B) False

20.

An increase in demand would enable a monopolist to raise its price while reducing its output.

A) True
B) False

21.

The market supply curve in an increasing-cost industry is:

A) a. upward sloping
B) b. downward sloping
C) c. vertical
D) d. horizontal
E) e. none of the above

22.

The total producer surplus is measured by:

A) a. the area between supply and demand curves.
B) b. the difference between the price the consumer is willing and able to pay and the price suppliers wish to charge to maximize their profits.
C) c. the area between the price consumers actually pay and the demand curve.
D) d. the area between the equilibrium market price and the supply curve.
E) e. the consumer willingness to pay as reflected by the equilibrium market price.

23.

. Economists measure economic (social) welfare by the

A) a. net consumer surplus
B) b. sum of consumer and producer surplus
C) c. sum of the net profits made by the industry's competitive firms
D) d. price consumers are willing to pay for one additional unit of a good
E) e. difference between the total consumer surplus and total producer surplus

lilacfish21

16. A monopoly will set the price

at the highest price along the demand it faces.

equal to the value at which marginal cost intersects the demand curve.

so that it can sell the quantity at which marginal revenue is equal to marginal cost.

so that it can sell the quantity at which marginal revenue is equal to zero.

17.

A monopolist will always end up choosing to operate

even if its profit are negative.

on the elastic portion of the demand it faces.

until such time as a new competitor enters its market.

only if it can capture the entire consumer surplus.

18.

When first-degree price discrimination is perfectly implemented social gain is maximized, with all gains going to the monopoly.

True

False

19.

Which of the following is the best example of second-degree price discrimination?

A car salesman attempts to discover and charge the highest price that the customer is willing to pay.

A sub sandwich shop that gives you a half-price sandwich for every six sandwiches you purchase.

Manufacturersâ use of discount coupons printed in Sunday newspapers.

Polaroid cameras and film.

20.

Third-degree price discrimination occurs when a monopoly separates its customers into distinct markets, charging a different price to each group.

True

False

orangealligator623

1. Alice lives in a town with only one movie rental store. Suppose Alice's demand for movie rentals per month is Q = 16 - 2P. The movie store currently charges $5 per movie but is thinking of adding a flat monthly cardholder fee and dropping the price to $2 per rental. At this new price, what is the largest cardholder fee that Alice will pay? If the rental store has a constant marginal cost of $2, which strategy is more profitable?

2. A monopolist faces a demand curve given by,

Y = 100 - P

with the inverse demand curve equal to,

P = 100- y and MR = 100- 2y.

The monopolist's total and marginal cost functions are,

TC = 700 + 20y and MC = 20.

a) Calculate the monopoly output level, the monopoly price, and the profits of the firm.

b) Draw a diagram to illustrate your answers to part a). Calculate the deadweight loss from this monopoly. [Hint: you need to work out the perfectly competitive quantity and price. The diagram will help you work out how to calculate the DW L using the simple geometry of triangles and rectangles.]

c) Explain why this market might be considered to be a natural monopoly.

d) Illustrate and explain the problem that emerges when the government regulates the monopolist by imposing marginal cost pricing.

e) If the government regulates the monopolist by imposing average cost pricing, what will be the monopolist's price and quantity? Draw a diagram to illustrate your answers. Explain the problem that exists with this average cost pricing. [Note: this is a trickier part than the others, so don't worry if you can't do it. If this question came up in the exam, I would miss out e) and have a)-d), making you feel a bit better! To answer it, you have to set p = AC and solve for output. It requires solving a quadratic equation with 2 potential output levels and working out which output level is the one the monopolist would produce. The quadratic equation is a simple one, but if you are not comfortable with maths, even its mention probably sounds like a nightmare.