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Answer to Question #52952 in Microeconomics for Yana

Question #52952
MULTIPLE CHOICE
1. A monopolist who is able to price discriminate by charging two different groups different prices:
a. will set prices so that the demand curve for one group is inelastic at the price charged and
the demand curve for the other group is elastic at the price charged.
b. will set prices so that both group's demand curves are elastic at the prices charged.
c. will set prices so that both group's demand curves are inelastic at the prices charged.
d. will set higher prices for the group whose demand curve is more elastic.
e. will do both b. and d.

2. Ceteris paribus, in which of the following cases would we expect economic profits to be greatest?
a. an unregulated monopolist who is able to price discriminate.
b. an unregulated monopolist who is unable to price discriminate.
c. a regulated monopolist required to charge a price no greater than marginal cost.
d. a regulated monopolist required to charge a price no greater than average cost.
Expert's answer
1. A monopolist who is able to price discriminate by charging two different groups different prices:
 a. will set prices so that the demand curve for one group is inelastic at the price charged and  the demand curve for the other group is elastic at the price charged.
 b. will set prices so that both group's demand curves are elastic at the prices charged.
 c. will set prices so that both group's demand curves are inelastic at the prices charged.
 d. will set higher prices for the group whose demand curve is more elastic.
 e. will do both b. and d.
Answer - B
 2. Ceteris paribus, in which of the following cases would we expect economic profits to be greatest?
 a. an unregulated monopolist who is able to price discriminate.
 b. an unregulated monopolist who is unable to price discriminate.
 c. a regulated monopolist required to charge a price no greater than marginal cost.
 d. a regulated monopolist required to charge a price no greater than average cost.
Answer - A

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