If a monopolist is practicing perfect price discrimination, then the following equation is true:
A) MC = 1/2 MR at the profit-maximizing level of output.
B) MR = 1/2 P for any unit.
C) MR = P for all units.
D) P = AVC at the profit-maximizing level of output.
E) AR = ATC at the profit-maximizing level of output.
Ans: C) MR = P for all units.
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Refer to Figure 17-1. Suppose that the economy is currently at point A, and the unemployment rate at A is the natural rate. What policy would the Federal Reserve pursue if it wanted the economy to move to point B in the long run?
A) Sell treasury bills. B) Raise the discount rate. C) Decrease the money supply. D) Buy treasury bills. E) No policy will move the economy to point B in the long run.
To allow a public utility (which is a natural monopoly) to earn only a normal profit, the government should
a. do all of the following b. set price equal to average cost c. equate marginal cost and average cost d. set marginal cost equal to marginal revenue e. set price equal to marginal cost