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Questions › JNU › JNU SSS 2010 › Q18
1 mark, −0.5Microeconomics › Monopoly and price discrimination › Monopoly equilibrium and marginal revenueHardabout 3 min

JNU SSS 2010 Question 18: Monopoly and price discrimination

A monopolist faces the following demand function D(P)D(P)D(P) : D(P)=10 for P in the interval [0, 10]D(P) = 10 \text{ for } P \text{ in the interval } [0,\ 10]D(P)=10 for P in the interval [0, 10] =20−P for P in the interval (10, 20)= 20 - P \text{ for } P \text{ in the interval } (10,\ 20)=20−P for P in the interval (10, 20) =0 for P in the interval [20, ∞)= 0 \text{ for } P \text{ in the interval } [20,\ \infty)=0 for P in the interval [20, ∞) Now suppose that the monopolist has zero-variable cost of production. However, if it produces any positive amount, it must incur a fixed cost of Rs 50. What is the optimal monopoly price?

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Plain-text version

A monopolist faces the following demand function D(P): D(P) = 10 for P in the interval [0, 10] = 20 - P for P in the interval (10, 20) = 0 for P in the interval [20, ∞) Now suppose that the monopolist has zero-variable cost of production. However, if it produces any positive amount, it must incur a fixed cost of Rs 50. What is the optimal monopoly price? (A) 15 (B) 10 (C) 5 (D) There is no monopoly equilibrium

Also written as: A monopolist faces the following demand function D(P): D(P) = 10 for P in the interval [0, 10] = 20 - P for P in the interval (10, 20) = 0 for P in the interval [20, inf) Now suppose that the monopolist has zero-variable cost of production. However, if it produces any positive amount, it must incur a fixed cost of Rs 50. What is the optimal monopoly price?

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

What this question tests

This question is on Monopoly equilibrium and marginal revenue, part of Monopoly and price discrimination in Microeconomics.

How a monopolist sets price and output where marginal revenue equals marginal cost.

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