Question

Which of the following statements is (are) correct?
(x) If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm sole ownership of the right to sell the drug for a limited number of years.
(y) In general, the price rises and the quantity sold of a drug fall when its patent runs out.
(z) Due to the nature of the patent laws on pharmaceuticals, the market for such drugs switches from monopolistic to competitive once the firm's patent runs out.
A. (x), (y) and (z) B. (x) and (y) only
C. (x) and (z) only D. (y) and (z) only
E. (x) only

Which of the following statements is (are) correct?
(x) A profit-maximizing perfect competitor will produce the level of output at which price is equal to marginal cost, but the typical profit-maximizing monopolist will not.
(y) Selling a good at a price where the demand curve intersects the marginal cost curve is consistent with the socially optimal level of output and a competitive market, but, it is not consistent with a market that consists of a profit-maximizing monopolist.
(z) Monopoly pricing causes a deadweight loss because a monopoly produces an inefficiently low output.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (y) only

Which of the following statements is correct?
A. If the monopolist is earning a positive economic profit, it must be producing where price is greater than average variable cost.
B. If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling fewer units at a higher price per unit.
C. When a monopolist produces where price equals the minimum of average total cost, it earns a positive economic profit.
D. If the monopolist is earning a positive economic profit, it must be producing where MR = MC.
E. If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit.

Answer 1

a) "C"

Statement X and Z are correct, Y is wrong because once the patent runs out the price falls and the quantity supplied rises as many new producers start producing it.

b) "A"

All the given statements about the monopoly and a perfectly competitive firm are correct.

c) "E"

Profit of a monopoly maximises at the point were the MR and the MC are equal, if the MR is greater then they can increase the profit by increasing the selling and lowering the price of the goods.