A Monopolist Facing Different Demand Curves in Two Separate Markets

question 173

Multiple Choice

A monopolist facing different demand curves in two separate markets maximizes profit by:

• A) setting marginal revenue equal to marginal cost for the combined demand curve and charging the maximum price for that quantity on the combined demand curve.
• B) completely ignoring the market with lower demand.
• C) completely ignoring the market with higher demand.
• D) setting marginal revenue equal to marginal cost and charging the maximum price that demand will bear in each market.

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Definitions:

Materials Price Variance

Materials price variance is the difference between the actual cost of materials used in production and the standard cost expected, it can indicate changes in market prices or purchasing efficiency.

Quantity Standard

A specific measure established to gauge the expected or optimal quantity of input required to produce a unit of output.

Price Standard

A pre-determined cost per unit of input or output, used for setting budgets and measuring performance.

Variable Overhead Efficiency Variance

Variable overhead efficiency variance is a metric used to measure the difference between the expected (standard) and actual use of variable overhead resources in production.