Monopoly Flashcards
1
Q
Where does a monopoly set optimal quantity?
A
The correct answer is that the optimal quantity produced for a monopolist is defined at the point where the marginal cost is equal to the marginal revenue.
2
Q
In general, the mark-up charged by monopolists is higher when which of the following properties holds?
A
Demand for the good is highly inelastic.
3
Q
If monopolists can perfectly price discriminate, what quantity is maximized?
A
Social welfare and producer surplus.
When monopolists can perfectly price discriminate, price and quantity sold are equal to the competitive market level (i.e., they are maximized). However, the entire surplus accrues to producers as producer surplus, while consumers have zero surplus
