Page 180 - DECO101_MICRO_ECONOMICS_ENGLISH

Unit 11: Monopoly

7. The diagram below represents an industry that was in perfect competition that has become Notes
a monopoly. Which area on the graph shows the level of producer surplus that will exist
under the monopoly?

Price
MC
1
2 3
4 5
AR

6 7
MR Quantity

8. Consider the following table and locate the profit maximising level of output; also estimate

the “degree of monopoly” corresponding to that level of output.
Output 1 2 3 4 5

Price 5 4 3 2 1
Average costs 3 3 3 3 3
9. Why is the monopolist’s MR less than AR?
10. A monopolist is selling fish. But if the fish don’t sell, they rot. What will be the likely

elasticity at the point on the demand curve at which the monopolist sets the price?
11. Discuss the relation between the average revenue curve and the marginal revenue curve
under simple monopoly.

12. How is price determined under a simple monopoly?
13. Will a monopolist continue to produce in the short run even if production means losses?
Explain.
14. A TV manufacturer produces X sets a week at a total cost of ` (1/25 X + 3X + 100). He is a
2
monopolist and the demand of his market is X = 75 – 3P, when the price is ` P per set. Show
that the maximum net revenue is obtained when about 30 sets are produced per week.
What is the monopolist’s price?
15. If you are a monopolist, how will you determine the price discrimination in various
markets?

16. Discuss different types of monopolies with help of suitable exmaples.

17. “Monopoly is economically inefficient”. Do you agree? Justify your answer.
Answers: Self Assessment

1. True 2. True
3. True 4. False

5. (a) 6. (d)
7. (a) 8. one
9. same 10. average variable cost

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