1. (0.1 pt) Once a monopolist chooses their profit-maximizing level of output, t

Question

1. (0.1 pt) Once a monopolist chooses their profit-maximizing level of output, they use the _________________________ to find the highest price it can charge for that quantity.

2. (0.2 pt) For a profit-maximizing monopoly that charges the same price to all consumers, the price (<, =, >) marginal revenue and marginal revenue (<, =, >) marginal cost. (Circle the correct answer for each.)

3. (0.1 pt) When a monopolist switches from charging a single price to perfect price discrimination, it reduces _________________________.

4. A publisher faces the following demand schedule for the next novel from one of its popular authors: (Make sure to show all your work.)

Explanation / Answer

1. demand curve

2. Price > MR and MR = MC

Equilibrium quantity is where MR = MC and equilibrium price is where intersection of MR and MC curve meets the demand curve.

3. Consumer surplus to zero

Under perfect price discrimination, monopolist charge highest price which each consumer is willing to pay. Every consumer pay their willingness price to monopolist which reduces consumer surplus to zero and transfer all consumer surplus to producer surplus.

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