1. A monopolist estimates that at the current price being charged for the product, marginal revenue is less than marginal cost, and price elasticity of demand is -1.4. To increase profit the monopolist should:
(a) Increase price and sell less
(b) Increase price and sell more
(c) Decrease price and sell less
(d) Decrease price and sell more
I think the answer is C but why the answer is D?
2.The table below presents data on the productivity of fruit pickers working on a fruit farm.The fruit farming industry can be assumed to be competitive.
the market price of fruit is $5 pro kilo
Number of workers Quantity of fruit picked per day (kg)
To maximise profit the factory should employ:
(a) 3 workers
(b) 4 workers
(c) 5 workers
(d) 6 workers
I think when the profit is max, that should become when MR=MC, therefore the MC is 110 and MR is 5x, the x represents the quantity of fruit per day.Thus it should be 110=5x and x is 22 but no answer reflects that. So I dont know how to deal with this question.
3.If the supply curve of a factor of production facing a competitive firm is perfectly inelastic, then from the firm's point of view:
(a) none of the factor's earnings is necessary transfer payment
(b) all of the factor's earnings is producer surplus
(c) none of the factor's earnings is rent
(d) all of the factor's earnings is rent
The correct answer for this Q is a or C I don't know why. Can u help me to explain, please?
4.Oligopolists are more likely to engage in successful collusion to maxmise industry profits when .
(a) the barriers to the entry of new firms into the industry are high
(b) The degree of product differentiation between each firms' product is high
(c)The number of member firms in the industry is high
(d) total demand for the industry's product is declining rather than growing
Why the answer is A?
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