Suppose a Profit-Maximizing Monopolist Faces a Constant Marginal Cost of $10

question 36

True/False

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $2,000.

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Definitions:

Reciprocity

The social norm that suggests people should return help, not harm, to those who have behaved kindly towards them.

Foot-In-The-Door Technique

A persuasion strategy that involves getting someone to agree to a small request in order to increase the likelihood of agreeing to a larger request later.

Door-In-The-Face Technique

A persuasion strategy where a large, unreasonable request is first made knowing it will be refused so that a smaller, more moderate request will be accepted.

Sleeper Effect Method

A phenomenon where a message that was initially discounted gains in persuasiveness over time, often due to the dissociation of the message from its source.