Question

1. Monopolists will earn the most profit by producing

where total cost in the lowest.

where total revenue is highest.

where total revenue is farthest above total cost.

2. When does price discrimination take place?

A business charges different prices to different customers based on their willingness to pay.

A monopoly enters a market with high-income customers.

A business conceals its pricing policies.

3. A utility for water is a natural monopoly in the local market. What is the optimal action to take when looking at keeping a competition policy for a the water utility?

Set the price where AC crosses the demand curve.

Set the price at the breakeven point.

Set the price below the average cost of production.

4. When a new firm enters a monopolistically competitive industry,

the perceived demand and marginal revenue curves for each incumbent firm will shift to the left.

the marginal revenue curves for each incumbent firm will shift to the right.

the perceived demand and marginal revenue curves for each incumbent firm will shift to the right.

the perceived demand curve for each incumbent firm will shift to the right.

5. How are perfect competition and monopolistic competition different?

Economic profit is not positive for perfect competitors, but it is for monopolistic competitive firms.

The resources in a society are under-allocated to production within a perfectly competitive industry.

Items sold within monopolistic competition have more variation in their characteristics.

Economic profit is more than zero for perfectly competitive firm, but is zero for monopolistic competitors.

Answer 1

a) "C"

A monopoly will make the most profit when total cost and the total revenue are farthest away.

b) "A"

When the firm charges a different price from different consumers. it will be termed as the price discrimination.

c) "A"

Set the price where the AC and the demand curve are equal.

d) "A"

the perceived demand and marginal revenue curves for each incumbent firm will shift to the left. as they will be producing less at the same price in the market.

e) "C"

Items sold within monopolistic competition have more variation in their characteristics.