A Monopolist Enjoys a Monopoly Over the Right to Sell

question 61

Multiple Choice

A monopolist enjoys a monopoly over the right to sell automobiles on a certain island.He imports automobiles from abroad at a cost of $10,000 each and sells them at the price that maximizes profits.One day, the island's government annexes a neighboring island and extends the monopolist's monopoly rights to this island.People on the annexed island have the same tastes and incomes and there are just as many people as on the first.

• A)The monopolist doubles his price and his sales stay constant.
• B)The monopolist keeps his price constant and his sales double.
• C)The monopolist raises his price but does not necessarily double it.
• D)The monopolist's profits more than double.
• E)None of the above.

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Definitions:

Gross Domestic Product

The total value of all goods and services produced over a specific time period within a country's borders, used as a comprehensive measure of economic activity.

Tires Purchased

The acquisition of tires, highlighting consumer or business buying behavior in the automotive market segment.

Calculating

The process of using mathematical techniques and operations to determine quantities, values, or results, often involving numbers and equations.

Aggregate Expenditure

The total amount spent on an economy’s goods and services, by households, businesses, the government, and foreign buyers.