Chapter 63, Problem 4MCQ

To determine

Common practice of single-price monopolists.

Answer to Problem 4MCQ

(e) Operating where marginal revenue equals marginal cost.

Explanation of Solution

Single-price monopolist’s profit maximizes where marginal cost equates to marginal revenue and this is the condition for operating in the market. Hence, option (e) is correct.

Two-part tariffs, advanced purchased restriction, volume discounts, and differentiating customers on their price elasticity of demand are practiced in price discrimination. Hence, options (a), (b), (c), and (d) are incorrect.

Economics Concept Introduction

When a monopolist charges a uniform price to every consumer then it is called a single-price monopolist but the price that is charged is higher than the perfectly competitive price. In this case, the monopolist is not able to extract the whole consumer surplus.