Question

In: Economics

1. Which of the following are true about monopolies? a. since monopolists control the market, they...

1. Which of the following are true about monopolies?

a. since monopolists control the market, they always earn positive economic profits

b. monopolists are price takers

c. neither statement is true

d. both statements are true

2. Price discrimination is the practice of charging:

a. different prices for different goods

b. different prices to different customers for the same product

c. the same price for different goods in different geographical locations

d. high prices for products with high marginal costs and low prices for those with low marginal costs

3. Which of the following is necessary to practice price discrimination?

a. the firm must have market power

b. the firm must not be able to prevent arbitrage of its product

c. the firm faces a perfectly elastic demand curve

d. the firm operates in a perfectly competitive industry

4. Price discrimination is motivated by a firm’s desire to:

a. penalize customers who do not match the racial or ethnic background of the firm

b. reduce the deadweight loss attributable to monopoly pricing

c. effect social justice through long-run sustainable pricing strategies

d. increase producer surplus

Expert Solution

Q.1 Which of the following are true about monopolies?

Answer:- (c) neither statement is true.

Because, a monopolist can bear losses in short run. The reason behind is production constraints increasing over fixed factors of production.

Another statement is not true ,because monopolists are price makers not price takers as they have full control over the market.

Q.2. Price discrimination is the practice of charging:-

Answer:- (b) different prices to different customers for the same product.

Because of the absence of uniform price policy, customers are not aware or they ignore the cost of production.

Q.3. Which of the following is necessary to practice price discrimination?

Answer:- (a) the firm must have market power.

Because, the firms operates in perfectly competitive industry cannot practice price discrimination because customers have full knowledge of market amd products.

Another reason is that the firms faces a perfectly elastic demand curve cannot practice price discrimination. Firm must have different elasticities in order to practice price discrimination.

Q.4. Price discrimination is motivated by a firm desire to

Answer:- (d) increase producer surplus.

Because a monopolist always aims to maximize his profits.

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Rahul Sunny answered 8 months ago

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