econ homework help?

Question

12. Which one of the following statement is TRUE?
A. A price discriminating single plant monopolist selling products in two markets should charge a higher price in the market that has a lower elasticity.
B. A price discriminating single plant monopolist selling products in two markets should charge a higher price in the market that has a higher elasticity.
C. A perfectly competitive firm selling products in two markets should charge a higher price in the market that has a higher elasticity.
D. A perfectly competitive firm selling products in two markets should charge a lower price in the market that has a higher elasticity.

13. Which one of the following statement is TRUE?
A. A firm satisfying the profit maximization condition will not necessarily make profit.
B. A monopolist does not follow any principle in choosing a point on a demand curve.
C. A profit maximizing competitive firm in the short run chooses quantity only by equating price and marginal cost, where marginal product of labor is rising.
D. Since P = AC (price equals average cost) in the long run, perfect and monopolistic competition market structures are both efficient.

[II] Problems:

Suppose the GoGo company produces sportswear in a perfectly competitive market, and faces a demand function QD = 20 – 2P. For each firm in this industry, suppose MC=AC=$5 in the long run.
1. Find the price charged by GoGo company.
2. Find the number of output produced by GoGo company.
3. Find the profit earned by GoGo company.
4. Find the consumer surplus generated by the company.
Now suppose aliens destroy all the competitors of GoGo company, so that GoGo is now a monopolist in the sportswear market.
5. Find the price charged by GoGo company now.
6. Find the number of output produced by GoGo company now.
7. Find the profit earned by GoGo company now.
8. Find the consumer surplus generated by the company now.
9. Find the welfare loss under monopoly

Answer 1

You should really try to do your own homework - especially at this level! Here is my shot at the answers:

12: I'm leaning towards C because you don't sell high in low elasticity, a monopoly wouldn't care as it is the only show in town, and you don't charge low in a highly elastic area - perfect competition or not.

13: I'd go with C because if you are meeting profit maximization - you have to be making a profit, monopolists are bound to supply, and monopolistics get damaged in the long run/ P=AC in the short run.

Problem: 1: Price is $10 (breakeven 20 - 2(10)) 2: Output is 2 (10 price divided by $5 MC) 3: $0 (Breakeven as output is unknown) 4: $10 for consumer surplus ($20 where demand intersects bar less price $10) 5: $20 (demand crossed bar there) 6: 4 (20 demand/5 marginal cost) 7: $80 (20*4) 8: $0 9: $10 (reversal of #4)