Suppose That a Monopolist Must Choose Between Two Points on Its

question 33

Multiple Choice

Suppose that a monopolist must choose between two points on its demand curve: it can sell 100 units for $3 each, or it can sell 140 units for $2 each.Which of the following is true?

• A)The monopolist is facing elastic demand.
• B)The monopolist is facing unit elastic demand.
• C)The monopolist is facing inelastic demand.
• D)The monopolist is facing perfectly elastic demand.
• E)The elasticity of demand cannot be determined with the information given.

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Definitions:

Herfindahl Index

A tool for measuring business sizes within their respective sectors, providing insight into the competitive landscape.

Four-firm Concentration Ratio

A measure that represents the market share of the four largest firms in an industry, used to assess the degree of competition and concentration in the market.

Mutual Interdependence

A situation in which entities rely on each other to a significant extent, particularly relevant in markets with a few dominant firms.

Antitrust Laws

Legislation enacted to prevent anti-competitive practices, monopolies, and to promote fair competition for the benefit of consumers.