Exam 23: Monopoly

Suppose a monopolist has marginal cost of zero but recurring fixed costs.Then the monopolist will produce the efficient level of output so long as he can first degree price discriminate.

Because of the monopoly power that comes with being the only firm to produce a product,it is always more efficient to have multiple firms in an industry.

When perfect price discrimination comes in the form of a two-part tariff,one part of the "tariff" just covers marginal costs.

Depending on the shape of the marginal cost curve,a monopolist might produce an output level on the elastic or the inelastic part of demand.

If the market demand curve has constant price elasticity of -1,the monopolist's price should approach infinity.

Explain what the Saudi oil minister meant when he warned OPEC of using its market power too much by saying "Remember,the Stone Age did not end because we ran out of stones."

Suppose a monopolist produces a positive level of output.If marginal costs are zero,this output level will occur where price elasticity of demand is exactly -1 unless there are recurring fixed costs.

Consumers prefer inefficient third degree price discrimination to efficient first degree price discrimination.

In the presence of positive production externalities,a monopolist might produce the efficient output level.

If a monopolist has no marginal costs and only recurring fixed costs,then,if he produces,any quantity that he produces is profit maximizing if the price elasticity of market demand is -1.

What are some obstacles to price discrimination that a monopolist who is protected by high barriers to entry might face?

If a monopolist has downward sloping average costs,he will not produce if he cannot price discriminate.