Question

1) A monopolist is able to choose whatever price that it wishes and is only constrained by its greed.

True

False

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2) Table 15-21
Tommy’s Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy’s is able to engage in perfect price discrimination.

COSTS			REVENUES
Quantity Produced	Total Cost	Marginal Cost	Quantity Demanded	Price	Total Revenue	Marginal Revenue
0	$100	--	0	$170		--
1	$140		1	$160
2	$184		2	$150
3	$230		3	$140
4	$280		4	$130
5	$335		5	$120
6	$395		6	$110
7	$475		7	$100
8	$575		8	$95

Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold?

	a.	$420
	b.	$140
	c.	$620
	d.	$450

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A monopolist produces where P > MC = MR.

True

False

Answer 1

1) A monopolist is able to choose whatever price that it wishes and is only constrained by its greed.- FALSE. A monopolist is constrained by market demand.

2) In perfect price discrimination, the monoplist will sell each unit at the its marginal price, so Total Revenue=160+150+140=$450

3)

A monopolist produces where P > MC = MR.-TRUE. The profit maximizing condition is MR=MC and price is always greater than Marginal revenue since demand curve is downward sloping.