9 Suppose that a monopoly in the market for an HIV drug turn

9. Suppose that a monopoly in the market for an HIV drug turns competitive after another company discovers another cure. What is likely to happen to prices and quantity in this market? A) both prices and quantity would rise B) prices would rise, but quantity would fall C) prices would fall, but quantity would rise D) both prices and quantity would fall 10. When a firm uses price discrimination successfully, the result is that producer surplus while deadweight loss compared to a single-price monopoly A) B) C) D) rises; rises because less output is produced with price discrimination rises; falls because output increases with price discrimination falls; rises because less output is produced with price discrimination falls; falls because output increases with price discrimination 11. If this monopolistically competitive firm maximizes profits in the short run, it must price its good at: MC Price ATC Demand MRQuantity 10 16 A) S3 B) $4 C) $7 D) S10 12. A firm will have a \"kinked\" demand curve if its decision to raise prices is matched by competitors, whereas its decision to lower prices ismatched by competitors A) always; always B) always; rarely C) rarely; always D) rarely; rarely

Solution

5) B because P > MC which implies more revenue will be received than the cost incurred if sales are increased. This would increase profits

6) C because patents restrict other firms to produce the same product so that a monopoly power is created

7) A because TR for 10 bowls is 150 and for 11 bowls it is 154. Hence MR is $4 for 11th bowl

8) B because MR = MC gives Q = 20 and price corresponding to this value is 10.

9) C because when monopoly turns competitive, prices are going to reduce due to increased competition and rivarly.

10) B

11) C

12) C