Question

21. A public park is a public good because:

a. it is both excludable and rival good.

b. it is excludable but non rival

c. it is non-excludable but rival

d. it is non-excludable and non-rival.

22. If there are 5 firms in the market each with 10% of the market share, and another 10 firms that have the remaining market split between them equally, we can say that C4 or Concentration Ratio is 55%.

True or False

23. Regulated monopolies THAT operate on cost plus pricing, may make some positive economic profit.

True or False

24.

A monopoly faces a demand curve like:

Price	Quantity Demanded
50	1
35	2
20	3
5	4

if it finds that it's MR = MC occurs at Q = 3, what is the profit that the firm will make?

a. 60

b. 20

c. There is insufficient information

d. 6.66

Answer 1

Answers and explanations as under:

21. A public park is a public good because:

d. it is non-excludable and non-rival.

In a public park, no one can be excluded from entering, as there is no entry fee. Further, one person's consumption doesn't reduce the consumption of others. It has adequate availability. Hence, it is a public good.

22. If there are 5 firms in the market each with 10% of the market share, and another 10 firms that have the remaining market split between them equally, we can say that C4 or Concentration Ratio is 55%.

False

As per the C4 ratio, market shares of the four largest firms are estimated. Here, the four largest firms have 10% market share each. Hence, the ratio is 40%.

23. Regulated monopolies THAT operate on cost plus pricing, may make some positive economic profit.

True

This is because, eventhough the monopoly is regulated, it has been allowed to charge a profit margin over and above the marginal cost of production. It may utilize this provision to charge a reasonable profit margin, and hence earn positive economic profits.

24.

A monopoly faces a demand curve like:

Price	Quantity Demanded
50	1
35	2
20	3
5	4

if it finds that it's MR = MC occurs at Q = 3, what is the profit that the firm will make?

c. There is insufficient information

Here, though the price and quantity information is available, the cost information is not available.

From P and Q, we can find Total Revenue as: TR = P x Q

But, we also need Total Cost: TC = FC + VC

Thus, we need information on fixed costs, variable costs, and thus marginal costs, at all levels of quantity. If we have more details on cost, we can find Profits as TR minus TC

Thus, there is insufficient information to answer the question.