True or False. Briefly justify your answers. t wants to sell a higher quantity,

Question

True or False. Briefly justify your answers. t wants to sell a higher quantity, it must set a higher price market power, the marginal revenue curve always lies below t may continue to earn economic profits in the long run due to barriers 1. If a 2. If a firm has he demand curve. 3. A monopoly to entry is inefficient because some consumer surplus is transferred to producer surplus of economies of scale (i.e., increasing returns to scale) is the source of a natural mono 5. The concept poly. a monopolist facing the following demand schedule. You produce output at a constant average and marginal cost of $12. Price Quantity $20 1 14 4 18 2 16 3 a. Calculate marginal revenue (MR) for each level of output b. Find the profit-maximizing price and quantity. c. How much economic profit ill you earn?

Explanation / Answer

1) False

A monopolist firm can sell more only when it lowers the price. This is the reason why marginal revenue curve is below demand curve in case of monopoly.

2) True

To sell additional unit of output firm has to reduce prices. Additional benefits from selling additional unit gets lower. That's why marginal revenue is below demand curve for a firm having market power.

3) True

Monopoly firm is a single firm in the market due to existence patent right, exclusive technology, etc. It restricts the entry of new firms. This enables the firm to charge higher price than free competitive prices.

4) False

Monopoly is inefficient because there exists deadweight loss. It is inefficient because of loss in total surplus and not because some of the consumer surplus is transferred to producer surplus.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.