Question

1. In a market served by a monopoly, the marginal cost is $60 and the price is $110. In a perfectly competitive market, the marginal cost is $60. If the marginal cost increased from $60 to $75, the monopoly would raise its price _____, and the price in the perfectly competitive market would _____. by $15; increase by $15 by $75; increase to $75 by less than $15; increase to $75 to $115; remain unchanged at $60

Answer 1

Answer:

by less than $15 ; increase to $75

Explanation:

As per the question,

We have been provided a monopoly served the market in which

The marginal cost = $60  

And

The price = $110.  

If the marginal cost increased from $60 to $75,  

∴ The monopoly would raise its price = $75 - $60  

                                                              = $15

And the price in the perfectly competitive market must be greater than $75.

Therefore,

In a perfectly competitive market, the marginal cost is $60. If the marginal cost increased from $60 to $75, the monopoly would raise its price by less than $15, and the price in the perfectly competitive market would increase to $75.