Question
In: Economics
Evaluate the validity of each of the following statements. Be sure to clearly accompany your explanation...
Evaluate the validity of each of the following statements. Be sure to clearly accompany your explanation using graphs and equations where appropriate.
e) If unsubsidized, a uniform pricing monopolist will only operate on the elastic portion of the demand curve.
Solutions
Expert Solution
TRUE , If unsubsidized , a uniform pricing monopolist will only operate on the elastic portion of the demand curve. Monopoly equilibrium is possible when the elasticity of average revenue curve or demand curve is greater than 1 .
The following graph shows the demand curve, MR curve and three MC curves.
Demand is unitary elastic at B , it is greater than 1 between D and B , Less than 1 between B and D'.
As ed=1 , the corresponding MR is equal to zero. If output and price is fixed at this stage then MR and MC is equal to 0 but MC can never be zero. So, output and price cannot be fixed when demand is unitary elastic.
If price and output were fixed at the stage where demand is inelastic , ed<1, Marginal cost must be negative as here marginal revenue is negative.But this is also not possible.
Marginal cost is always positive , monopoly equilibrium is possible ony at the stage where demand is elastic. Hence, equilibrium is not possible at Q on MC1 curve (where MR=0) or at R on MC2 curve (negative MR). It is possible only at P on MC curve (Positive MR) between D and B . Here, the demand curve is elastic.
Hence, if unsubsidized, a uniform pricing monopolist will only operate on the elastic portion of the demand curve.
Rahul Sunny answered 2 years agoRelated Solutions
Evaluate the validity of each of the following statements. Be sure to clearly accompany your explanation...
Evaluate the validity of each of the following statements.
Be sure to clearly accompany your explanation using graphs and
equations where appropriate.
a) Because the presence of a monopoly causes the economic “pie”
to get smaller, we should not expect to see them exist in
practice.
Answer each of the following statements True/False/Uncertain. Give a full explanation of your answer. A) If...
Answer each of the following statements True/False/Uncertain.
Give a full explanation of your answer.
A) If consumers have negatively correlated reservation prices,
bundling is a profitmaximizing strategy.
B) Vertical arrangements (integration, exclusive dealing, etc.)
can be used to reinforce cartel participation.
C) Market-based recoupment is necessary for predatory pricing to
be successful.
D) Ownership (or procurement) of intellectual property (patents,
copyrights, etc.) is a direct observation of market power.
E) It is always in the best interest of society to...
Please read clearly and answer with explanation Thanks! B ) Show how each of the following...
Please read clearly and answer with explanation Thanks!
B ) Show how each of the following would affect
the U.S. balance of payments. Include a description of the debit
and credit items, and in each case identify which specific account
is affected (e.g., imports of goods and services, IM;
exports of assets, EXA; and so on).
a). The U.S. central bank purchases $500
million worth of U.S. Treasury bonds from a British financial firm
and sells pound sterling foreign reserves.
Conduct a hypothesis test to answer the following research question. Be sure to clearly state each...
Conduct a hypothesis test to answer the following research
question. Be sure to clearly state each step of a hypothesis in
your response as well as indicating your critical regions,
computing obtained statistic and drawing a conclusion.
Does prenatal exposure to alcohol impact birth weight (test n =
16 newborn rats)
Population Values : μ = 18 grams σ = 4 grams
Sample Mean: M = 15 grams
Be sure to clearly state your hypotheses in the hypothesis tests and state your conclusions in...
Be sure to clearly state your hypotheses in the
hypothesis tests and state your conclusions in terms of the
problem. Use ?=.?? for all tests.
The following table presents shear strength (in kN/mm) and weld
diameters (in mm) for a sample of spot welds.
Diameter Strength
4.2
51
4.4
54
4.6
69
4.8
81
5.0
75
5.2
79
5.4
89
5.6
101
5.8
98
6.0
102
6.Can the least-squares line be used to predict the strength for
a diameter of...
Decide whether each of the following statements makes sense (or is clearly true) or does not...
Decide whether each of the following statements makes sense (or
is clearly true) or does not make sense (or is clearly false).
Explain your reasoning.
1. I haven't won in my last 25 pulls on the slot machine, so I'm
due to win on the next pull
2. The larger a sample you take, the more the population looks
like a normal distribution
3. The larger a sample you take, the closer the sample itself is
to being normally distributed
Answer each of the following statements True/False/Uncertain. Give a full explanation of your answer including graphs...
Answer each of the following statements True/False/Uncertain.
Give a full explanation of your answer including graphs where
appropriate. (When in doubt, always include a full labeled
graph.)
A) An individual’s Marginal Rate of substitution is different at
every point along his or her price consumption path.
B) Quasi-Linear utility, Cobb-Douglas utility, and perfect
substitutes are each able to characterize an individual having
interior and corner solutions for a positive level of
consumption.
C) Consider the following three consumption bundles
(X1,X2)=(10,10)...
1. (30 marks) Answer each of the following statements True/False/Uncertain. Give a full explanation of your...
1. Answer each of the following statements
True/False/Uncertain. Give a full explanation of your answer (1-2
sentences should suffice). A fully labeled graph is a welcome
addition to any answer (if applicable), though it is not
necessary.
A) A Giffen good obeys the Law of Demand.
B) A monopolist always prices in the inelastic portion of
consumer demand.
C) If a player has a dominant strategy, that strategy is always
part of a Nash Equilibrium.
D) Maximizing total surplus ensures...
Explain whether the following statements are TRUE or FALSE. State your stance clearly.
Question 1Explain whether the following statements are TRUE or FALSE. State your stance clearly.a) A positive term spread is indicative of economic recession. b) By reducing the required reserve ratio, the central bank can increase the monetary baseand thus the money supply.
Question 2a) What is yield curve? Explain whether it can be downward sloping. b) If bond investors decide that 30-year bonds are no longer as desirable an investment asthey were previously, predict what will happen to the yield...
Determine whether each of the following statements is TRUE or FALSE and write a short explanation...
Determine whether each of the following statements is
TRUE or FALSE and write a short explanation for your
answer
It is a good practice to have loss leaders at the very front of
the store so that more customers can see them quickly and get
attracted to them.
One of the objectives of a promotion strategy is to impede the
success of new market entrants in gaining a significant market
share.
One advantage of intensive distribution is that the firm...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- Case Study: Personal Beliefs in the Workplace Don Shakow was a prominent professional who worked in...
- 1: Competency framework usage is the modern best practice in management. What is meant by competency...
- A 19.34 g mixture of sugar (C12H22O11) and table salt (NaCl) is dissolved in 231 g...
- Young and Company claims that its pressurized diving bell will, on average, maintain its integrity to...
- 1) Alternative compiled code sequence using instructions in classes A, B, C. What is the average...
- An asset is purchased on January 1 for $48,700. It is expected to have a useful...
- Do we have any online or offline tool to convert c and cpp programs into MIPS...
ADVERTISEMENT