F Suppose a monopolist with a constant marginal cost sells its product in two se
ID: 1131219 • Letter: F
Question
F Suppose a monopolist with a constant marginal cost sells its product in two separate markets. Then the profit-maximizing price should be higher in the market with a larger (in absolute value) price elasticity of demand 13. F It is optimal to bundle two different products if consumers who value the first product higher also value the second product higher. 14. OT OF In Cournot duopoly with linear demand, if one of the firms increases its output level, it is optimal for the other firm to decrease its output level. 15. The total output level of Cournot duopoly is higher that the monopoly output 16.Explanation / Answer
Answer 13 is False
Price elasticity if larger than 1 then it is revenue decreasing event if we increase the price as the consmuer is more cautious about pric change hence profit maximizing price should be lower in this case if e is higher
Answer 14 is True
Bundling always allow an incumbant to introduce 2 different products in a bundle without lowering the price of any item.
Answer 15 is True
In cournot duopoly the best responce for monopoly output of anay firm which is a-c/2 is a-c/4 if Linear demand equation for this type of duopoly can be givne as P=a-bQ and c is margnal cost.
Answer 16
Total Output of Cournot Duopoly if P= a-Q where Q=q1+q2 is Q =2/3(a-c) and in case of Monopoly one produces (a-c)/4 and other produces (a-c)/2=3/4(a-c)
therfore 2/3(a-c)<3/4(-c)
Hence False
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