(i) Consumer surplus is zero.

(ii) Producer surplus is zero.

(iii) Deadweight loss is zero.

Evaluate whether following statements about price discrimination are TRUE or FALSE?

Statement 1: Price discrimination is about charging different buyers different prices for different goods or services.

Statement 2: Arbitrage makes it difficult for a firm to set different prices in different markets.

Which of the following statements about price discrimination is true?

(i) If the demand curves are different, it may be more profitable to set different prices in different markets than a single price than covers all markets.

(ii) The price discrimination which can increase the total revenue may have no effect on the profit-maximizing output level.

(iii) Arbitrage makes it difficult for a firm to set different prices in different markets.

Assume that the two firms A and B are in two isolated markets. The total cost functions of both firms are shown below:

Firm A’s total costs = $(150 + 5Q)

Firm B’s total costs = $(100 + 5Q)

where Q is the quantity produced. 

Suppose that both firms face the same demand function, that they are both pursuing a profit maximization policy, and that both firms are earning positive economic profits. Compared with firm A, firm B produce __________, and have __________ profits and __________ producer surplus.

A firm faces the following demand and total cost schedules, with all quantities listed on a per-month basis. Suppose that it is required to produce a whole number of items each month, i.e. Q is an integer. What is the price charged by the firm?

Determine whether the following statements are TRUE OR FALSE.

• Statement 1 : In the short run, a perfectly competitive firm should produce a positive quantity only if marginal cost is larger than average variable cost at the quantity.
• Statement 2 : The supply curve of a monopolist is always upward sloping.
• Statement 3: The long-run industry supply curve of a competitive industry can be downward sloping.

The following diagram shows the market demand for widgets and the associated marginal revenue curve. When the industry is monopolized, the marginal cost curve is MCM. When the industry is competitive, the industry’s marginal cost curve is MCC. Suppose the industry is currently monopolized and you are a judge with the power to break up the monopoly into several competing firms. In order to exercise that power to improve economic efficiency, which four of the labelled areas would you want to measure?

Determine whether the following statements about a single-price monopolist are TRUE OR FALSE.

• Statement 1: When fixed cost is zero, the profit of the monopolist is the same as the producer surplus.

• Statement 2: A monoplist will not produce the quantity corresponding to the segment of the linear demand curve that is price inelastic.

• Statement 3: A monopolist will set a higher markup when he faces a demand that is relative less price elastic.

Which of the following cases is NOT a benefit of monopoly to the society?

Which of the following cases does not reveal market power?