1.If there is perfect Price discrimination then the monopolist will produce at a

Question

1.If there is perfect Price discrimination then the monopolist will produce at a) P= MC and output will be socially efficient b) P = MR output will be socially efficient c) MR = MC and output will not be socially efficent d) none of the above.

2.Firms should hire as long as a) wage is equal to the marginal product of labor b) wage is equal to the price of output times marginal cost product of labor c) wage is above the marginal product of labor.

3.In the graph, if price is P3 then a) firm will maximize profit at point C b)the firm will cover the cost of production (implicit costs included) c) economic profit is zero d) all of the above

4.Looking at the table if the market price is $75, the purely comp firm will produce a)1 unit b)2 unit c)3 unit d)shut down.

Explanation / Answer

(1) (a)

With perfect price discrimination, monopolist equates price with M and captures entire consumer surplus as profit. The output thus produced is socially optimal.

(2) None of options (a), (b) or (c) is correct.

Optimal labor demand is when

Wage rate = Price of output x Marginal product of labor, or

Wage rate = Marginal revenue product of labor (MRPL = Price of output x Marginal product of labor)

(3) (c)

When price is P3, Price = MC = ATC, therefore economic profit is zero, and firm earns only normal profit.

(4) (c)

Firm will produce at that level where Price = MC. If MC > Price, firm lowers output. When price is $75, closest value of MC is $60 for which P > MC, when output is 3 units.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

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