Suppose a monopolist can charge different prices to different customers, such as doctors charging different prices depending on whether the patient is insured. How will profits and marginal revenue of such a price-discriminating monopolist compare to profits and MR of an ordinary monopolist who must charge all patients the same fee?
The price-discriminating monopolist will have higher profits. While cost of medical services is unaffected, marginal revenue is higher. Charging a lower but still profitable rate to uninsured patients can be done without reducing price to insured patients. MR need not be less than price for the price-discriminating monopolist.
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Assume that the supply curve is horizontal because marginal cost is constant at $10. John, Robert, and Jimmy each value one compact disc at $20 but only Jimmy and John value a second compact disc (Jimmy at $5 and John at $15). The maximum possible value achieved in this market is
a. $35. b. $60. c. $75. d. $80.
The demand for a good is elastic if
A) an increase in its price results in an increase in total revenue. B) a decrease in its price results in a decrease in total revenue. C) an increase in its price results in a decrease in total revenue. D) the good is a necessity.
The economy's supply of loanable funds is
a. a result of firms' borrowing decisions b. a vertical line at the current level c. downward sloping d. a result of people's saving decisions e. the same as wage-related rent
For a monopolistically competitive firm, at the profit-maximizing quantity of output,
a. price exceeds marginal cost. b. marginal revenue exceeds marginal cost. c. marginal cost exceeds average revenue. d. price equals marginal revenue.