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Questions › CUET-PG › CUET-PG 2024 › Q15
4 marks, −1Microeconomics › Monopoly and price discrimination › Lerner index and monopoly powerModerateabout 1 min

CUET-PG 2024 Question 15: Monopoly and price discrimination

The mark-up as a fraction of price for the profit maximizing quantity Q∗Q^{*}Q∗ for a monopolist can be expressed as P∗−C′(Q∗)P∗=−1e∗\dfrac{P^{*}-C'(Q^{*})}{P^{*}} = -\dfrac{1}{e^{*}}P∗P∗−C′(Q∗)​=−e∗1​, where e∗e^{*}e∗ is the price elasticity of demand. We can say from this

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The mark-up as a fraction of price for the profit maximizing quantity Q* for a monopolist can be expressed as (P*-C′(Q*))/P* = -1/e*, where e* is the price elasticity of demand. We can say from this (A) The mark-up is higher for goods with a higher price elasticity of demand (B) The mark-up is lower for a good with a higher price elasticity of demand (C) The mark-up is constant for all price elasticities of demand (D) The mark-up is lower for goods with a lower price elasticity of demand

Also written as: The mark-up as a fraction of price for the profit maximizing quantity Q* for a monopolist can be expressed as (P*-C'(Q*))/P* = -1/e*, where e* is the price elasticity of demand. We can say from this

Monopoly and price discrimination has come up 128 times in 7 exams since 2004.

What this question tests

This question is on Lerner index and monopoly power, part of Monopoly and price discrimination in Microeconomics.

The mark-up of price over marginal cost and its link to the elasticity of demand.

TestStop has 12 past-paper questions on this subtopic; the nearest in year are below.

  • IIT JAM 2022 · Q40A monopolist faces demand Q = P^e, where e is the price elasticity of demand (e < -1), and Marginal Cost =…
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Question from the CUET-PG 2024 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.