Consider a monopolist who chooses to provide special discount to a group of customers with low willingness to pay—say, students, or seniors, or people living in a lower-income country. That kind of behavior cannot be explained by standard microeconomic theory, since a profit-maximizing monopolist would never want to provide any discounts.(a) True. (b) False.

Consider a monopolist who chooses to provide special discount to a group of customers with low willingness to pay—say, students, or seniors, or people living in a lower-income country. That kind of behavior cannot be explained by standard microeconomic theory, since a profit-maximizing monopolist would never want to provide any discounts.(a) True. (b) False.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter9: Monopoly

Section: Chapter Questions

Problem 11SQ

See similar textbooks

Similar questions

Which of the following statements is true? Group of answer choices A monopolist's profit maximizing output is when marginal revenue = marginal cost A monopolist's perceived demand is less than the marginal revenue A monopolist's marginal revenue is equal to the price
Refer to the diagram for a nondiscriminating monopolist. If the government regulates the market such that the firm must charge the socially optimal price, Multiple Choice the firm will still earn economic profits. the firm will break even. there will be an overallocation of resources to production of this good. the firm will incur economic losses and need to be subsidized.
A monopolist knows there are two customers with different demand curves for two differently sized bags of potato chips. Customer S would only buy the small bag and has a willingness-to-pay given by P=160-2q (where P denotes the price and q denotes the quantity). Customer L would buy the large bag and has a willingness-to-pay given by P=200-q. The monopolist does not know who is customer S and who is customer L. Marginal cost of production is zero. BEFORE second degree price discrimination, how large are the bags?
A monopolist knows there are two customers with different demand curves for two differently sized bags of potato chips. Customer S would only buy the small bag and has a willingness-to-pay given by P=160-2q (where P denotes the price and q denotes the quantity). Customer L would buy the large bag and has a willingness-to-pay given by P=200-q. The monopolist does not know who is customer S and who is customer L. Marginal cost of production is zero. BEFORE second degree price discrimination, and if the monopolist perfectly price discriminated the small bag, what is the price of the small bag?
a profit-maximizing monopolist faces the demand curve q=200-5p. it produces at a constant marginal cost of $10 per unit. a quantity tax of $10 per unit is imposed on the monopolist's product which the monopolist should pay. the price of the monopolist's product after the tax. hint: since the conopolist will pay the tax, it increases its cost. you must write the correct cost function to solve the problem.
Suppose that a monopolist can segregate his buyers into two different groups to which he can charge two different prices. In order to maximize profit, the monopolist should charge a higher price to the group that has:*the higher elasticity of demand.the lower elasticity of demand.richer members.none of the above The socially optimal price (P = MC) is socially optimal because*it reduces the monopolist’s profit.it yields a normal profit.it minimizes ATC.it achieves allocative efficiency. The main problem with imposing the socially optimal price (P = MC) on a monopoly is that the socially optimal price:may be so low that the regulated monopoly can’t break even.may cause the regulated monopoly to engage in price discrimination.may be higher than the monopoly price.none of the above
A firm that sells coffee is a monopolist in a small market. The firm wants to start selling another good, in which it will be a monopolist as well. There are two options: sugar and tea. Both have the same marginal costs. Which of the two should the firm choose to sell along with coffee and why? Would your answer change if the choice was between sugar and shampoo? (Assume that sugar and shampoo have the same marginal cost as well).
When a monopolist faces two types of outwardly indistinguishable consumers, one with a higher willingness to pay then the other, then, by using non-linear pricing, the monopolist will extract the entire consumer surplus from the customer with the high willingness to pay and only part of the surplus from the customer with the lower willingness to pay. True or False?
A perfect price discriminating monopolist is able to Question 14 options: a) produce where the price of the last unit sold is equal to marginal cost b) maximize profit and capture all consumer surplus c) produce a socially optimal level of output commensurate to that of perfect competition d) all of the above
Consider a monopolist who is selling his blockbuster drug in two markets where one market is much larger than the other. Suppose the demand in the two markets is given by q1 = 30 − p1 and q2 = 3 − p2 (quantity is measured in millions of complete dosages and price is in your favorite currency) and the marginal cost of production and distribution is roughly the same and equal to 1 per unit (c=1). This problem asks you to compare equilibrium outcomes (prices, quantities, profits, consumer surplus, and consumer surplus per unit of output) when the monopolist can price discriminate across the two markets versus when it must set a uniform price. It then asks you to comment on some recent policy proposals. For each market separately, set up and solve the monopolist’s profit-maximizing problem. Specifically, write down/compute the following. Inverse demand and the profit functions. Equilibrium prices (), quantities () and profits () Consumer surplus () and consumer surplus per unit of…
A monopoly firm faces a market demand p(Q) = 100 – Q, where Q is output. Marginal cost is 2Q and marginal revenue is 100 – 2Q. If a competitive industry, serving the same market as the monopolist, has a marginal cost of MC(Q) = Q, then a. average cost pricing generates maximum welfare b. antitrust action against the monopolist would generate the same welfare as maximum price setting at marginal cost for the existing monopoly c. antitrust action against the monopolist would generate less welfare than maximum price setting at marginal cost for the existing monopoly d. antitrust action against the monopolist would generate more welfare than maximum price setting at marginal cost for the existing monopoly
Does a monopolist take market price as given? Why or why not? No, because barriers to entry exist, a monopolist does not take the market price as given. No, a monopolist takes into account that its output decision can affect price, and its marginal revenue is not its price. Yes, a monopolist takes the market price as given because the monopolist faces potential competition from other firms, so the price charged must be competitive. Yes, a monopolist’s marginal revenue is the given market price.