Identify the Truthfulness of the Following Statements

question 63

Multiple Choice

Identify the truthfulness of the following statements.
I. IEPR states that the monopolist's optimal markup of price above marginal cost can be expressed as follows: the monopolist's optimal markup, expressed as a percentage of price, is equal to minus the inverse of the price elasticity of demand.
II. IEPR tells us that the price elasticity of demand plays a vital role in determining what price a monopolist should charge to maximize profits.

• A) I and II are true.
• B) I and II are false.
• C) I is true; II is false.
• D) II is true; I is false.

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Definitions:

Capillary Action

The ability of water to move in small-diameter tubes as a consequence of its cohesive and adhesive properties.

Surface Tension

The attraction that the molecules at the surface of a liquid may have for one another.

Osmosis

The net movement of water (the principal solvent in biological systems) by diffusion through a selectively permeable membrane from a region of higher concentration of water (a hypotonic solution) to a region of lower concentration of water (a hypertonic solution).

Capillary Action

The ability of a liquid to flow in narrow spaces without the assistance of, and in opposition to, external forces like gravity.