Question

1.what is the consumer surplus when a monopoly is able to engage in perfect price discrimination?

A. It is equal to producer surplus

b.It is greater than producer surplus

c.it is equal to producer profits

d.it is equal to zero

2.A monopoly damages the welfare of society by:

a.Supplying an inefficiently low quantity of output

b.incurring marginal costs

c.creating monopoly profits

d. creating producer surplus

3.Which of the following is NOT a barrier to entry in monopoly market?

a.A key resource is owned by a single firm

b.The government awards a firm the exclusive right to produce a product

c.Average total costs are always declining

d.A monopoly firm faces perfectly elastic demand

4. For a natural monopoly, what is the relationship between average total cost and marginal cost?

a.Average total cost is falling, and marginal cost is above average total cost

b. Average total cost is falling, and marginal cost is below average total cost

c.Average total is cost is rising, and marginal cost is below average total cost

d.Average total cost is rising, and marginal cost is above average total cost

Answer 1

1).

D

perfect price discrimination means that the producer charge each consumer their maximum willingness to pay for a quantity of good. Since consumers are paying their maximum willing to pay, therefore their consumer surplus is Zero.

2).

A

Welfare is affected when the producer supply lesser quantity of good at given level of price.

3).

D

A firm facing perfectly elastic demand curve which means that any increase or decrease in the price level will cause demand to fall to zero.

4).

B

In natural Monopoly, the average total cost falls which production of every unit of output. This is because of economies of scale.