Author Question: A monopolist will charge a lower price and produce more output than if it was operating in a ... (Read 78 times)

joblessjake · **on:** Jun 30, 2018

A monopolist will charge a lower price and produce more output than if it was operating in a competitive market.
a. True
b. False
Indicate whether the statement is true or false

Question 2

Lori plans to buy a convertible this weekend. Her two favorite cars are the BMW, which would give her 160,000 utils of satisfaction, and the Mitsubishi Eclipse Spyder, which would give her only 124,000 utils of satisfaction. The BMW that she wants sells for 37,220, while the Mitsubishi sells for 28,200 . She can afford either car.
a. Which car will she buy in order to maximize her utility?
b. To what price will her second choice have to fall to get her to make her first choice?

joneynes · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

False

Answer to Question 2

a. She will buy the Mitsubishi, because its marginal-utility-to-price ratio, 4.397, is higher than the marginal-utility-price ratio for the BMW (4.03).
b. If the price of the BMW falls to 34,114.17 = 160,000 / 4.397, she will be indifferent between the two. If the price of the BMW falls to 34,114.16, she will buy the BMW.