Question

Mike's Boba is the only place within 100 miles that sells boba milk tea. Which of the following statements should be true about Mike's Boba?

	a.	The price of Mike's boba will be equal to his marginal cost.
	b.	Costs are irrelevant to Mike because he is a monopolist.
	c.	The price of Mike's boba will be less than his marginal cost.
	d.	The price of Mike's boba will be more than his marginal cost.

Answer 1

Mike's Boba is the only place within 100 miles that sells boba milk tea . As we can seit is a only shop in 100 miles  i.e around 160 km . So Boba milk tea lover don't have much choices to go any where else .

In economic sense , Mike boba don't have any substitute near to it , so it can charge on his own prices and can earn super normal profits as Mike Boba is acting like a monopolist . If there are few substitute available near to Mike Boba , then at that case there will be a perfect substitute case , in which the price of Mike's boba will be equal to his marginal cost. But here the case is different so Cost are irrelevent to Mike because he is monopolist

Hence (B)part is a correct answer