Question

Question 5

A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price

		always exceeds ATC.
		equals marginal revenue.
		will always equal ATC.
		will vertically intersect demand where MR = MC.

Question 8

In a natural monopoly case, the socially optimal pricing policy rule will often yield a higher price than the fair-return pricing rule.

True

False

Question 10

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by

		raising price while keeping output unchanged.
		reducing output and raising price.
		reducing both output and price.
		increasing both price and output.

Question 4

A monopolist is free to charge whatever price it wishes, to sell a certain level of output.

True

False

Answer 1

5) Vertically intersect demand where MR = MC. price can be greater than or less than the average total cost depending upon the cost structure and the demand function. Price is always greater than marginal revenue. Marginal revenue and marginal cost both are equal to each other and this gives the quantity. Vertically travelling along the quantity line, the demand function will give the price charged at this point

8) this is false. average total cost is greater than marginal cost for a large range of output. this implies that when marginal cost pricing, that gives a socially efficient level of output, is charged, it is less than the average cost pricing

10) Prince marginal revenue is less than the marginal cost the monopolist should reduce production and increase its price. reducing output and raising price.

4) false.