1. (2*3=6 marks) State whether you agree or disagree with each of the following
statements. Using appropriate diagrams, explain your response.
a. A profit maximizing monopolist must operate on the elastic portion of the
Agree. See figure 11.2 ( a monopolist must produce where MC=MR, if we
draw an MC curve (MC must be greater than zero), it will intersect the MR to the left of q
=12 units (0 AR the monopolist would
make a loss.
2. (2.5) a. Using diagrams, explain how a monopolist creates a deadweight loss.
(2.5) b. What is price-discrimination? Under what conditions, a monopolist can
See (pages 3