Question

17. In order to price discriminate, a monopoly firm must be able to: a separate customers based on different elasticities of demand b. charge each customer the same price. c. incur a different cost for producing each unit of output. d. all of the above. 18. If DeBeers has a monopoly in the diamond market, then: a. DeBeers must be engaging in perfect price discrimination if it is charging every customer the same price for a diamond. b. the marginal revenue of selling one more diamond is greater than the price of that diamond if DeBeers cannot price discriminate the marginal revenue of selling one more diamond is less than the price of that diamond if DeBeers cannot price discriminate. the market demand for diamonds is perfectly elastic. c. d. 19. A producer of Product X is most likely to be a monopolist when: a. there are close substitutes for Product X b. there are no close substitutes for Product X and there are barriers to entry into the industry c. a single firm owns the patent for manufacturing Product X, but other firms can sell Product Y which is a close substitute for Product X d. there are no close substitutes for Product X and there are no barriers to entry into the industry 20. For a monopolist, it is always true that: profit is maximized where marginal revenue equals marginal cost b. economic profit is posititve in both the short run and the long run. c. price is greater than average total cost d. all of the abore are altways true. 1 4 650

Answer 1

Ans:

17) Option A

separate consumers based on different elasticities of demand.

In order to price discriminate a monopoly must sell different units at different prices and for this purpose it should separate consumers based on different elasticities of demand.

18) Option C

the MR of selling one more diamond is less than the price of that diamond if Debeers cannot price discriminate.

For a monopoly the marginal revenue of selling additional unit is less than the price.This is because inorder to increase sales price should be decreased.

19) Option B

there are no close substitutes for Product X and there are barrier to entry into the industry.

Monopoly is market structure characterized by single seller and who sells good that have no close substitutes and there are barrier to entry into the industry.