Homework Answers
1.A) Pure monopoly is supported by far-away (large) minimum efficiency scales. The given statement is correct as monopoly creates inefficiency.
B) The given statement is correct. Pure monopoly requires blocked entry as higher profits will attract competitors in the market.
C) The given statement is incorrect. The larger the MES , stronger the monopoly.
D) The statement is correct as patents help in creating monopoly.
E) The statement is correct as pure monopoly must have no close substitutes or, else competition will rise.
2.A) Demand for market and individual producer coincide : Monopoly
B) Flat demand for individual producer : Competitive
C) Decreasing marginal revenue : Monopoly
D) Marginal costs are U shaped : Both
E) Constant marginal revenue : Competitive
3. Here, only statement (D) is correct. Others are all
incorrect.
Explanation : A monopolist will produce at MC=MR and price will be
set on the demand curve above the equilibrium point. Also, a
monopolist may suffer losses.
4.A) This statement is correct as a monopolist produces below its social optimum.
B) The statement is correct as price discrimination increases profit of the monopolist.
C) The statement is correct as monopolies have neither allocative nor productive efficiency.
D) The statement is incorrect as price discrimination are even lawful .
E) The statement is correct as monopoly charges a higher price i.e, some consumer income gets transferred to the monopolist.
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Please mark ALL correct answers A) Pure monopoly is supported by far-away (large) minimum efficiency scales...
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