Assume that a monopolist decides to maximize revenue rather than profit. How does this operating objective change the size of the deadweight loss? If you are a "benevolent" manager of a monopoly firm and are interested in reducing the deadweight loss of monopoly, should you maximize profits or maximize revenue? Explain your answer
A revenue maximizer operates where MR = 0 . This solution moves the monopolist closer to the socially optimal competitive outcome and reduces deadweight loss. Revenue maximization is potentially a more "socially" optimal objective for monopoly markets than profit maximization.
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What is meant by diminishing marginal benefits? Are you likely to experience diminishing marginal benefits for goods that you like a lot? Are there exceptions to the general rule of diminishing marginal benefits? (Hint: think about batteries that you
would use in a flashlight that requires two batteries.) Explain your answer.
A natural monopoly arises in an industry in which the per-unit cost of production is: a. lowest when there are a large number of producers in the industry. b. lower for the smaller firms than for larger firms
c. minimized at the output where the industry's profit is maximum. d. lowest when a single firm produces the entire output of the industry.
A monopoly firm selling moustache wax to vain men in a small town is currently maximizing profits by charging a price of $5. It follows that the marginal cost of moustache wax
A. is greater than $5. B. is equal to $5. C. is less than $5. D. None of these choices are true.
What is a four-firm concentration ratio, and how is it used?
What will be an ideal response?