The statements for price and marginal revenue.

Question

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Answer 1

Question

Chapter 13, Problem 1P

(a)

To determine

The statements for price and marginal revenue.

(a)

Expert Solution

Explanation of Solution

The statement is not agreeable. A monopolist chooses the quantity that sets the marginal cost equal to the marginal revenue. Then, the monopolist charges a higher price than the marginal revenue. Since the monopolist faces a downward sloping demand curve, the monopolist has to lower its price, in order to sell more.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Marginal cost: Marginal cost is the additional cost incurred by a firm by producing an extra per unit of output.

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

(b)

To determine

Pricing in a monopoly.

(b)

Expert Solution

Explanation of Solution

The statement is not agreeable. This is because the demand still constricts monopoly. Substitutes, however distant, are available for monopoly’s output. Thus, the monopoly cannot virtually charge any price for the product since an increase in price causes a decrease in sales which may or may not decrease the total revenue. However, there is only one profit maximizing price for the monopoly.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Substitute good: Two goods are said to be substitutes, if the change in price of one good (increase or decrease) would change the demand for the other good (increase or decrease).

(c)

To determine

Demand elasticity and marginal revenue.

(c)

Expert Solution

Explanation of Solution

The statement is agreeable. When the demand elasticity is equal to –1 (which occurs at the midpoint of the demand curve), the marginal revenue curve would bisect the quantity or horizontal axis at that same output level, causing the marginal revenue to be 0.

Economics Concept Introduction

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

Elasticity of demand: Elasticity of demand is the responsiveness of the quantity demanded to a change in price; more responsiveness implies more elasticity.

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Answer 2

Question

Chapter 13, Problem 1P

(a)

To determine

The statements for price and marginal revenue.

(a)

Expert Solution

Explanation of Solution

The statement is not agreeable. A monopolist chooses the quantity that sets the marginal cost equal to the marginal revenue. Then, the monopolist charges a higher price than the marginal revenue. Since the monopolist faces a downward sloping demand curve, the monopolist has to lower its price, in order to sell more.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Marginal cost: Marginal cost is the additional cost incurred by a firm by producing an extra per unit of output.

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

(b)

To determine

Pricing in a monopoly.

(b)

Expert Solution

Explanation of Solution

The statement is not agreeable. This is because the demand still constricts monopoly. Substitutes, however distant, are available for monopoly’s output. Thus, the monopoly cannot virtually charge any price for the product since an increase in price causes a decrease in sales which may or may not decrease the total revenue. However, there is only one profit maximizing price for the monopoly.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Substitute good: Two goods are said to be substitutes, if the change in price of one good (increase or decrease) would change the demand for the other good (increase or decrease).

(c)

To determine

Demand elasticity and marginal revenue.

(c)

Expert Solution

Explanation of Solution

The statement is agreeable. When the demand elasticity is equal to –1 (which occurs at the midpoint of the demand curve), the marginal revenue curve would bisect the quantity or horizontal axis at that same output level, causing the marginal revenue to be 0.

Economics Concept Introduction

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

Elasticity of demand: Elasticity of demand is the responsiveness of the quantity demanded to a change in price; more responsiveness implies more elasticity.

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Answer 3

Question

Chapter 13, Problem 1P

(a)

To determine

The statements for price and marginal revenue.

(a)

Expert Solution

Explanation of Solution

The statement is not agreeable. A monopolist chooses the quantity that sets the marginal cost equal to the marginal revenue. Then, the monopolist charges a higher price than the marginal revenue. Since the monopolist faces a downward sloping demand curve, the monopolist has to lower its price, in order to sell more.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Marginal cost: Marginal cost is the additional cost incurred by a firm by producing an extra per unit of output.

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

(b)

To determine

Pricing in a monopoly.

(b)

Expert Solution

Explanation of Solution

The statement is not agreeable. This is because the demand still constricts monopoly. Substitutes, however distant, are available for monopoly’s output. Thus, the monopoly cannot virtually charge any price for the product since an increase in price causes a decrease in sales which may or may not decrease the total revenue. However, there is only one profit maximizing price for the monopoly.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Substitute good: Two goods are said to be substitutes, if the change in price of one good (increase or decrease) would change the demand for the other good (increase or decrease).

(c)

To determine

Demand elasticity and marginal revenue.

(c)

Expert Solution

Explanation of Solution

The statement is agreeable. When the demand elasticity is equal to –1 (which occurs at the midpoint of the demand curve), the marginal revenue curve would bisect the quantity or horizontal axis at that same output level, causing the marginal revenue to be 0.

Economics Concept Introduction

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

Elasticity of demand: Elasticity of demand is the responsiveness of the quantity demanded to a change in price; more responsiveness implies more elasticity.

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Answer 4

Question

Chapter 13, Problem 1P

(a)

To determine

The statements for price and marginal revenue.

(a)

Expert Solution

Explanation of Solution

The statement is not agreeable. A monopolist chooses the quantity that sets the marginal cost equal to the marginal revenue. Then, the monopolist charges a higher price than the marginal revenue. Since the monopolist faces a downward sloping demand curve, the monopolist has to lower its price, in order to sell more.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Marginal cost: Marginal cost is the additional cost incurred by a firm by producing an extra per unit of output.

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

(b)

To determine

Pricing in a monopoly.

(b)

Expert Solution

Explanation of Solution

The statement is not agreeable. This is because the demand still constricts monopoly. Substitutes, however distant, are available for monopoly’s output. Thus, the monopoly cannot virtually charge any price for the product since an increase in price causes a decrease in sales which may or may not decrease the total revenue. However, there is only one profit maximizing price for the monopoly.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Substitute good: Two goods are said to be substitutes, if the change in price of one good (increase or decrease) would change the demand for the other good (increase or decrease).

(c)

To determine

Demand elasticity and marginal revenue.

(c)

Expert Solution

Explanation of Solution

The statement is agreeable. When the demand elasticity is equal to –1 (which occurs at the midpoint of the demand curve), the marginal revenue curve would bisect the quantity or horizontal axis at that same output level, causing the marginal revenue to be 0.

Economics Concept Introduction

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

Elasticity of demand: Elasticity of demand is the responsiveness of the quantity demanded to a change in price; more responsiveness implies more elasticity.

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Answer 5

Chapter 13, Problem 1P

(a)

To determine

The statements for price and marginal revenue.

(a)

Expert Solution

Explanation of Solution

The statement is not agreeable. A monopolist chooses the quantity that sets the marginal cost equal to the marginal revenue. Then, the monopolist charges a higher price than the marginal revenue. Since the monopolist faces a downward sloping demand curve, the monopolist has to lower its price, in order to sell more.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Marginal cost: Marginal cost is the additional cost incurred by a firm by producing an extra per unit of output.

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

(b)

To determine

Pricing in a monopoly.

(b)

Expert Solution

Explanation of Solution

The statement is not agreeable. This is because the demand still constricts monopoly. Substitutes, however distant, are available for monopoly’s output. Thus, the monopoly cannot virtually charge any price for the product since an increase in price causes a decrease in sales which may or may not decrease the total revenue. However, there is only one profit maximizing price for the monopoly.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Substitute good: Two goods are said to be substitutes, if the change in price of one good (increase or decrease) would change the demand for the other good (increase or decrease).

(c)

To determine

Demand elasticity and marginal revenue.

(c)

Expert Solution

Explanation of Solution

The statement is agreeable. When the demand elasticity is equal to –1 (which occurs at the midpoint of the demand curve), the marginal revenue curve would bisect the quantity or horizontal axis at that same output level, causing the marginal revenue to be 0.

Economics Concept Introduction

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

Elasticity of demand: Elasticity of demand is the responsiveness of the quantity demanded to a change in price; more responsiveness implies more elasticity.

Answer 6

Chapter 13, Problem 1P

(a)

To determine

The statements for price and marginal revenue.

(a)

Expert Solution

Explanation of Solution

The statement is not agreeable. A monopolist chooses the quantity that sets the marginal cost equal to the marginal revenue. Then, the monopolist charges a higher price than the marginal revenue. Since the monopolist faces a downward sloping demand curve, the monopolist has to lower its price, in order to sell more.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Marginal cost: Marginal cost is the additional cost incurred by a firm by producing an extra per unit of output.

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

Answer 7

Chapter 13, Problem 1P

(a)

To determine

The statements for price and marginal revenue.

Answer 8

(a)

Expert Solution

Explanation of Solution

The statement is not agreeable. A monopolist chooses the quantity that sets the marginal cost equal to the marginal revenue. Then, the monopolist charges a higher price than the marginal revenue. Since the monopolist faces a downward sloping demand curve, the monopolist has to lower its price, in order to sell more.

Answer 9

(a)

Expert Solution

Answer 10

(a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Marginal cost: Marginal cost is the additional cost incurred by a firm by producing an extra per unit of output.

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

Answer 13

(b)

To determine

Pricing in a monopoly.

(b)

Expert Solution

Explanation of Solution

The statement is not agreeable. This is because the demand still constricts monopoly. Substitutes, however distant, are available for monopoly’s output. Thus, the monopoly cannot virtually charge any price for the product since an increase in price causes a decrease in sales which may or may not decrease the total revenue. However, there is only one profit maximizing price for the monopoly.

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Substitute good: Two goods are said to be substitutes, if the change in price of one good (increase or decrease) would change the demand for the other good (increase or decrease).

Answer 14

(b)

To determine

Pricing in a monopoly.

Answer 15

(b)

Expert Solution

Explanation of Solution

The statement is not agreeable. This is because the demand still constricts monopoly. Substitutes, however distant, are available for monopoly’s output. Thus, the monopoly cannot virtually charge any price for the product since an increase in price causes a decrease in sales which may or may not decrease the total revenue. However, there is only one profit maximizing price for the monopoly.

Answer 16

(b)

Expert Solution

Answer 17

(b)

Expert Solution

Answer 18

Expert Solution

Answer 19

Economics Concept Introduction

Monopoly: Monopoly is a market structure where there is only one seller of a good or service that does not have a close substitute.

Substitute good: Two goods are said to be substitutes, if the change in price of one good (increase or decrease) would change the demand for the other good (increase or decrease).

Answer 20

(c)

To determine

Demand elasticity and marginal revenue.

(c)

Expert Solution

Explanation of Solution

The statement is agreeable. When the demand elasticity is equal to –1 (which occurs at the midpoint of the demand curve), the marginal revenue curve would bisect the quantity or horizontal axis at that same output level, causing the marginal revenue to be 0.

Economics Concept Introduction

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

Elasticity of demand: Elasticity of demand is the responsiveness of the quantity demanded to a change in price; more responsiveness implies more elasticity.

Answer 21

(c)

To determine

Demand elasticity and marginal revenue.

Answer 22

(c)

Expert Solution

Explanation of Solution

The statement is agreeable. When the demand elasticity is equal to –1 (which occurs at the midpoint of the demand curve), the marginal revenue curve would bisect the quantity or horizontal axis at that same output level, causing the marginal revenue to be 0.

Answer 23

(c)

Expert Solution

Answer 24

(c)

Expert Solution

Answer 25

Expert Solution

Answer 26

Economics Concept Introduction

Marginal revenue: Marginal revenue is the additional revenue earned by a firm by producing an extra per unit of output.

Elasticity of demand: Elasticity of demand is the responsiveness of the quantity demanded to a change in price; more responsiveness implies more elasticity.