Exam 6: Extreme Markets II: Monopoly

The following figure represents two types of demand curves, of two sets of consumers visiting an amusement park.$3 is the marginal cost of providing the service. -Refer to Figure .What is the maximum cover charge that the amusement park can levy on consumers whose demand curve is D₁?

People in the city of Maurus have a flatter demand curve for television sets than people in the city of Sienna.It can be concluded that a producer of television sets can price discriminate by charging a higher price in Maurus than in Sienna.

X-inefficiency implies:

The following figure shows the demand and marginal revenue for a monopolist, who has many buyers with different valuations of the good.Each buyer demands only one unit of the good, and only two are willing to pay $6.5 for it.The valuation decreases for each additional buyer as shown in the figure.The marginal cost of production is $3 per unit. -Refer to Figure .If the profit maximizing monopolist does not practice discrimination, what uniform price will he charge and how much profit will he earn?

The following figure shows the demand curve and marginal revenue curve for a monopolist who incurs a marginal cost of $2 per unit. -Refer to Figure .Calculate the deadweight loss when the monopolist incurs a marginal cost of $2 per unit.

Bundling of products becomes _____, if the valuations of different customer groups are _____.

Price discrimination increases producer surplus for a monopolist.

The following figure represents two types of demand curves, of two sets of consumers visiting an amusement park.$3 is the marginal cost of providing the service. -Refer to Figure .What is the maximum cover charge that can be levied on consumers whose demand curve is D₂?

The following table shows the price and revenue for a monopolist at different levels of production.The monopolist incurs no marginal cost of production. Quantity Price Revenue 2 16 32 3 15 45 4 14.5 58 5 11.6 58 6 9.5 57 7 8 56 -Refer to Table .Calculate the marginal revenue from the third unit.

When can a monopolist practice price discrimination?

Why is bundling of unrelated products, one of which is available in the competitive market, a losing strategy?

You and your friend go out shopping for television sets for your respective apartments.You find the one you want to buy and pay extra money to have it delivered during the weekend.Your friend is unwilling to pay extra and will wait for the television to be delivered as per the store's usual practice.Which of the following conclusions can be drawn from this information?

The following figure shows the demand curve and marginal revenue curve for a monopolist who incurs a marginal cost of $2 per unit. -Refer to Figure .What is the monopolist's profit when he incurs a marginal cost of $2 per unit?

In the small country of Talisman, the liquor industry is monopolized by a single producer Best Drinks Inc.Best Drinks charges high-end customers like 5-star hotels a much higher price than it charges local pubs.This discrimination is possible only if:

A monopolist faces a horizontal demand curve while a perfect competitor faces a downward sloping demand curve for their respective products.

Two groups of consumers have different valuations of the two monopoly products you as a monopolist have bundled together.If their valuations for the two products are proportional, i.e.Group A's valuation of X is $10 and Y is $15, while Group B's valuation of X is $20 and Y is $30, bundling the products will be more profitable for the monopolist.

How is the profit maximizing price and output calculated for a monopolist when i) it incurs no marginal cost, and ii) when it incurs positive marginal cost? Discuss with an example.

A monopolist charges $7 per unit for selling 6 units of his product.To sell 7 units, he reduces price to $6.5 per unit.The marginal revenue (net addition to revenue) from selling the seventh unit is then $3.5.

Monopoly output is relatively lower than a competitive market output as resources remain unutilized under the former.

The greater the differences in demand elasticities of consumers within a market, the more the monopolist benefits from charging a uniform price for his product.