All monopolies make economic profit, maintained by some sort of barrier to entry

Question

All monopolies make economic profit, maintained by some sort of barrier to entry. True Tease Insurance companies charge moon a higher price for automobile insurance than women. I Ki? costs of Insuring men are higher because they get Into than do women. Which of the following statements is TRUE? The insurance companies are practicing price discrimination. The Insurance companies are not practicing price discrimination. The insurance companies are practicing inter temporal price discrimination. The Insurance companies are using a bundling/tying strategy. In a constant cost industry, the market price and average cost are equal to $23 Therefore, which of the following is correct? An Increase in demand will cause the short run price to rise above $23. but in the long run, the price will return to $23. An Increase In demand will cause profits to rise and firms to enter the Industry until profits return to normal. A decrease in demand will cause market price to fall below average cost and thus firms will earn negative profits. All of the answers are correct.

Explanation / Answer

8. True as barriers in the entry and exit of firm helps the monoplist to earn economic profit in the long run.

9. The insurance company is practicing price discrimination as it charge different price for men and women.

Price discrimination is a practice of charging different prices from different customers to earn higher profit.

10. An increase in demand will cause the short-run price to rise above $ 23, but in the long run, the price will return to $ 23.

Increase in demand increases the average cost which increases the price level due to this firms profit will reduce.

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