Question

1) 1) A single-price monopolist is currently producing an output level where P-520, MR = $13, ATC = $15, and MC = $14. In order to maximize profits, this monopolist should A) shut down B) decrease production and increase price. C) not change his output level, because he is currently at the profit-maximizing output level. D) increase production and reduce price. E) there is insufficient information to make a recommendation 2) 2) Consider a monopolist that is able to distinguish between two distinct market segments, A and B. for its product. Marginal cost is constant at $18 for each unit produced. The firm is currently selling its output at a single price and allocating its output across segments such that marginal revenue in segment A is $25 and marginal revenue in segment B is $15. How can this firm maximize its profit? A) decrease the output in segments A and B B) decrease the output in segment A and increase the output in segment B C) increase the output in segments A and B D) maintain the current output and its allocation across segments E) increase the output in segment A and decrease the output in segment B 3) One reason airlines charge a higher price to business travellers is that A) business travellers have a relatively lower demand elasticity than other travellers. B) business travellers have a relatively higher demand elasticity than other travellers. C) they are thereby able to minimize costs. D) business travellers don't profit maximize. E) government sets the price policies. Quantity Demanded Price S6 $2 TABLE 10-1 4) -_ 4) Refer to Table 10-1. For a single-price monopolist, the marginal revenue associated with increasing sales from 5 to 6 units is A) -4. B) -2 - Co. D) 2. E) 4.

Answer 1

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" Answer-B = Profit maximising condition is where MR=MC Here MR<MC, so production should decrease upto when MC=MR - Production should decrease from C2 to Q, and price showd increase from Pito P2. MR MC w E DO 2) - Answer o firm should equal the MR of each segment to me that is $18 to maximise profit. So by increasing output in segment A and decreasing Output in segment B. 3) Answer = Less elastic demand higher price in order business will travel through is higher products are charged to maximise profit. Because airlines even if price 4 Answer 0=2 - Marginal Revenue is change in total Revenue. Total Revenue at unit 5= 8x5=40 Total Revenue at Unit 6= 7x6 = 42 Change in total revenue = 42-40 = 2