Question

Answer true or false as the case may be
1. Generally the prices of a monopoly industry will be higher than those of a competitive industry.
2. Monopolists generally want the demand curve they face in the market to be more elastic, in order to increase prices and total income.
3. Diminishing returns means that production is reduced.
4. The average income curve and the marginal income curve is the same as the demand faced by a firm in a perfectly competitive market.
5. If marginal revenue is greater than marginal cost, the firm increases its profits by increasing its output.
6. If the price is below the minimum average variable cost, the company will close.
7. The supply curve of a company in a perfectly competitive market gives us the quantities of product that are offered at different prices as long as the company has economic profits greater than zero.
8. In long-run equilibrium, every firm in a competitive market will have profits equal to 0.
9. When a monopolist practices price discrimination, it is necessary to meet two conditions: have separate markets and that the elasticities of demand are different in each of them.
10. The monopoly generates a social cost because generally a smaller quantity is produced and sold at a higher price, compared to a competitive market
11. Monopolists cannot charge the price they want, as market demand plays an important role in that decision.
12. Generally the prices of a monopoly industry will be higher than those of a competitive industry.
13. Monopolists generally want the demand curve they face in the market to be more elastic, in order to increase prices and total income.

Answer 1

1. True, because monopoly is the single seller and have control over the prices and monopoly always charge price more than perfect competition.

2 True, because in monopolist when demand is elastic then the marginal revenue is positive.

3. False, because diminishing returns show increase in cost of production.

5. True, because when marginal revenue is greater than marginal cost it means creating one more product would bring more revenue than it would cost, so profit would increase.

6. True. Because firm always operate when either P > AVC or P = AVC. when P < AVC the firm should shut down.

8. True, because in long run in the perfect competition every firm normal profit(TR = TC). So profit is zero.