A Monopolist Has a Constant Marginal Cost of $2 Per

question 14

Multiple Choice

A monopolist has a constant marginal cost of $2 per unit and no fixed costs.He faces separate markets in the United States and England.He can set one price p₁ for the U.S.market and another price p₂ for the English market.If demand in the United States is given by Q₁ = 7,000 - 700p₁ and demand in England is given by Q₂ = 1,200 - 200p₂, then the price in the United States will

• A)equal the price in England.
• B)be smaller than the price in England by $2.
• C)be larger than the price in England by $4.
• D)be larger than the price in England by $2.
• E)be smaller than the price in England by $4.

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Definitions:

Tacit Collusion

A form of collusion that occurs without explicit agreement, where firms indirectly coordinate actions by understanding mutual interests.

Overt Collusion

An explicit agreement among competitors to fix prices, allocate markets, or limit production, which is illegal in many jurisdictions.

Tacit Collusion

A form of collusion in which firms in a market coordinate their pricing or output strategies without explicit communication or agreement.

Competition

The rivalry among sellers trying to achieve such goals as increasing profits, market share, and sales volume by varying the elements of the marketing mix.