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A profit maximizing monopolist charges:
Downward Sloping
Both curves to be downward sloping with Marginal Revenue falling below demand on all but the first point.
The price it receives is less than Average Variable Cost.
The monopolist will charge more and produce less.
Productively and allocatively inefficient.
If the consumers can be grouped into different price categories based on their elasticity.
The price consistent with Marginal Cost = Marginal Revenue.
The firm would produce more and charge less.
A profit maximizing Monopolist should shut down in the short run if:
Downward Sloping
Both curves to be downward sloping with Marginal Revenue falling below demand on all but the first point.
The price it receives is less than Average Variable Cost.
The monopolist will charge more and produce less.
Productively and allocatively inefficient.
If the consumers can be grouped into different price categories based on their elasticity.
The price consistent with Marginal Cost = Marginal Revenue.
The firm would produce more and charge less.
Whether or not it pays off to price discrimination depends on:
Downward Sloping
Both curves to be downward sloping with Marginal Revenue falling below demand on all but the first point.
The price it receives is less than Average Variable Cost.
The monopolist will charge more and produce less.
Productively and allocatively inefficient.
If the consumers can be grouped into different price categories based on their elasticity.
The price consistent with Marginal Cost = Marginal Revenue.
The firm would produce more and charge less.
A Monopolist who does not engage in price discrimination is usually:
Downward Sloping
Both curves to be downward sloping with Marginal Revenue falling below demand on all but the first point.
The price it receives is less than Average Variable Cost.
The monopolist will charge more and produce less.
Productively and allocatively inefficient.
If the consumers can be grouped into different price categories based on their elasticity.
The price consistent with Marginal Cost = Marginal Revenue.
The firm would produce more and charge less.
If a profit maximizing Monopolist were to implement a ground breaking technology that reduced their costs,
Downward Sloping
Both curves to be downward sloping with Marginal Revenue falling below demand on all but the first point.
The price it receives is less than Average Variable Cost.
The monopolist will charge more and produce less.
Productively and allocatively inefficient.
If the consumers can be grouped into different price categories based on their elasticity.
The price consistent with Marginal Cost = Marginal Revenue.
The firm would produce more and charge less.
If we look at the shape of the Pure Monopoly's demand curve, we would expect it to be:
Downward Sloping
Both curves to be downward sloping with Marginal Revenue falling below demand on all but the first point.
The price it receives is less than Average Variable Cost.
The monopolist will charge more and produce less.
Productively and allocatively inefficient.
If the consumers can be grouped into different price categories based on their elasticity.
The price consistent with Marginal Cost = Marginal Revenue.
The firm would produce more and charge less.
If we compare a monopolist to a purely competitive firm,
Downward Sloping
Both curves to be downward sloping with Marginal Revenue falling below demand on all but the first point.
The price it receives is less than Average Variable Cost.
The monopolist will charge more and produce less.
Productively and allocatively inefficient.
If the consumers can be grouped into different price categories based on their elasticity.
The price consistent with Marginal Cost = Marginal Revenue.
The firm would produce more and charge less.
If we were looking at the Demand and Marginal Revenue Curves, we would expect:
Downward Sloping
Both curves to be downward sloping with Marginal Revenue falling below demand on all but the first point.
The price it receives is less than Average Variable Cost.
The monopolist will charge more and produce less.
Productively and allocatively inefficient.
If the consumers can be grouped into different price categories based on their elasticity.
The price consistent with Marginal Cost = Marginal Revenue.
The firm would produce more and charge less.
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