Question

1) Which of the following statements regarding a monopolist is correct? A) A monopolist will only produce an output where the demand is perfectly elastic, B) A monopolist will only produce an output where the demand is elastic C) A monopolist will only produce an output where the demand is inelastic. D) A monopolist will only produce an output where the demand is unitary elastic. 2) When is a monopolist's total revenue at a maximum? A) When its marginal revenue is at a maximum. B) When it is equal to its average revenue C) When it is equal to its marginal revenue. D) When its marginal revenue is equal to zero. E) When its average revenue is equal to its marginal revenue. 3) What is meant by the term natural monopoly? A) A single producer in a market, usually with monopoly rights over input resources, who is able to produce at a higher cost than competing firms could. B) A single producer in a market, usually supported by government subsidies, who is able to produce at a higher cost than competing firms could. A single producer in a market, usually with patent rights, who is able to produce at a cost equal to those of the competing firms. D) A single producer in a market, usually with large economies of scale, who is able to produce at a lower cost than competing firms could. 4) Which of the following is a correct statement of the socially optimum price? A) It is a price equal to the marginal revenue. B) it is a price equal to the lowest average cost. C) It is a price equal to the average cost D) It is a price equal to the marginal cost.

Answer 1

As per policy we have to answer first four parts

1) Solution: A monopolist will only produce an output where the demand is elastic
Explanation: The monopolist produces the output at which marginal revenue equals marginal; and produces at price elastic part of demand

2) Solution: when its marginal revenue is equal to zero
Explanation: A monopolist maximizes total revenue at the quantity where marginal revenue equals zero

3) Solution: A single producer in a market, usually with large economies of scale, who is able to produce at a lower cost than competing firms could
Explanation: A natural monopoly arises if a single firm can produce the entire output with large economies of scale than could many firms.

4) Solution: It is a price equal to the marginal revenue
Explanation: The social optimum price arises when the price equals marginal cost