The Nondiscriminating Pure Monopolist Must Decrease Price on All Units

question 28

Multiple Choice

The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why

• A)there are barriers to entry in pure monopoly.
• B)a monopoly has a perfectly elastic demand curve.
• C)marginal revenue is less than average revenue.
• D)total revenues are greater than total costs at the profit maximizing level of output.

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Definitions:

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy an asset at a specified price within a specified time.

Capital Gain

The profit from the sale of a capital asset for more than its purchase price.

Strike Price

The fixed price at which the holder of an option can buy (call option) or sell (put option) the underlying security or commodity.

Call Options

Financial contracts that give the buyer the right, but not the obligation, to buy an underlying asset at a specified price within a certain time period.