Question

Can anybody help me with the questions below?

1) Natural monopolies:

a) are always protected by government policy

b) are the only monopolies that are efficient

c) can capture the lowest production cost possible for industry

d) all of the above

2) Price discrimination:

a) tends to decrease to profit of the firm

b) is more successful if resale of the product is possible from one consumer to another

c) can be a successful strategy for any firm in a competitive market

d) can benefit consumers with lower willingness to pay when compared to other consumers in the market

3) Calculate profits and determine best option

Types	Price	Q	AC
Hard Cover	$27.95	0.5 millions	$1.50
Paperback	$9.99	1 millions	$1.50

Pricing Options:

Option 1: Only sell the hardcover at $27.95

Option 2: Only sell the paper back at $9.99

Option 3: Sell hardcover at price of $27.95 and paperback at a price of $9.99

Which price option would generate the most profit and how much is the profit?

4) In the short run, product differentiation enables firms in monopolistically competitive markets to:

a) act like price takers

b) produce a good for which there are exact substitutes

c) act like monopolists

d) produce a good for which there are no close substitutes

5) Complete the questions below:

Price	Quantity	Total Revenue	Marginal Revenue	Marginal Cost
$100	0	0	---	---
$90	1	90	90	7
$80	2	160	70	15
$70	3	210	50	24
$60	4	240	30	30
$50	5	250	10	42
$40	6	240	-10	56
$30	7	210	-30	62
$20	8	160	-50	75
$10	9	90	-70	97

How much is the equilibrium price and quantity (based on the table above)?

a) Price $30: Quantity 7

b) Price $40: Quantity 6

c) Price $60: Quantity 4

Answer 1

1) C Natural monopoly is the monopoly caused due to economies of scale

2)D can benefit consumers with lower willingness to pay and profit of firm increases

3)Option 3 is the best and profit=13.225+8.49=$21.715million

4) C differentiated good in monopolistic market makes goods close substitutes and they will act as a monopoly in their market

5)C Profit is maixmised when MR=MC. Thus price=60 and quantity=4