Question

In the two-period dynamic monopoly, if the monopolist succeeds in selling a sufficiently high quantity in the first period,

Question 24 options:

	A) the second-period demand curve will become horizontal.
	B) the second-period demand curve will become unit elastic.
	C) the second-period demand curve will lie close to the price axis.
	D) the second-period demand curve will shift substantially to the right.

If the government attempts to force a natural monopoly to charge a price equal to marginal cost,

Question 21 options:

	A) the natural monopoly will still make high profits.
	B) total welfare is maximized.
	C) the natural monopoly's marginal cost curve will shift up.
	D) the natural monopoly will shut down.

Answer 1

20 (D)

Reason in two period dynamic monopoly model, if monopolist succeeds in selling a sufficiently high quantity in the first period, then in the second period it will further increase and will shift the demand curve to right hand.

21 (D)

Reason if governments attempts to force a naturl monopoly to charge a price equal to marginal cost then it will not able to sustain in the market they have to shut down this natural monopoly.