Question

7) If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then
A) consumer surplus is larger than under single-price monopoly.
B) social welfare is larger than under perfect competition.
C) the monopoly's profits are larger than under single-price monopoly.
D) the monopoly's profits are larger than under perfect price discrimination.

8) Regardless of market structure, all firms
A) consider the actions of rivals.
B) maximize profit by setting marginal revenue equal to marginal cost.
C) produce a differentiated product.
D) have the ability to set price.

9) Two firms sell 100% orange juice in 10-ounce bottles. The juice is only good for one week. The two firms have contracts for all the oranges produced in a large geographic area. Each firm decides how many bottles of juice to produce at the same time. This market is best described with a
A) Bertrand model.
B) Stackelberg model.
C) monopolistic competition model.
D) Cournot model.

Answer 1

Answer 7

The correct option is C) The monopoly's profits are larger than under single-price monopoly.

A single-price monopoly is a firm that must sell each unit of its output for the same price to all its customers. DeBeers sell diamonds (quality given) at a single price. Price Discrimination. A price-discriminating monopoly is a firm that is able to sell different units of a good or service for different prices.

Answer 8

The correct option is B) maximize profit by setting marginal revenue equal to marginal cost.

Economists tell us that a business can maximize its profit by producing at the level where marginal revenue equals marginal cost. As long as marginal revenue is greater than marginal cost, it pays to produce more. Each added unit sold will add more to revenue than to costs.

Answer 9

The correct option D) Cournot model.

Cournot competition is an economic model describing an industry structure in which rival companies offering an identical product compete on the amount of output they produce, independently and at the same time. It is named after its founder, French mathematician Augustin Cournot