Page 178 - DECO405_MANAGERIAL_ECONOMICS

Unit 10: Imperfect Competition – Monopoly

Notes

6. Examine the features of monopoly competition through appropriate examples.
7. Show that under monopoly P>MC at equilibrium.

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.
2
14. A TV manufacturer produces X sets a week at a total cost of (1/25 X + 3X + 100). He is a
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?

Answers: Self Assessment

1. (a) True (b) True (c) True (d) False

2. (a) i (b) iv (c) i
3. (a) one (b) same (c) average variable cost
(d) discrimination (e) an optimal (f) Dumping (g) substitute

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