Sia
Question
Microeconomics
Posted 7 months ago
Blammo Industries is a profit maximizer that sells custom made hats and is the only producer in a market. It charges some customers more than other customers because the hats bought by some buyers cost Blammo more to produce than the hats purchased by other buyers.
Based on this information, each statement below is true EXCEPT
Choose 1 answer:
(A) Blammo Industries has a downward sloping demand curve.
(B) Blammo Industries is a price discriminating monopolist.
(C) Blammo industries does not have a constant marginal cost curve
(D) Blammo industries will produce the quantity where marginal cost equals marginal revenue
(E) Blammo Industries operates in an industry with barriers to entry.
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Answer from Sia
Posted 7 months ago
Solution
a
Blammo Industries is a profit maximizer and the only producer in the market, indicating it is a monopoly
b
Since Blammo charges different prices to different customers, it is engaging in price discrimination
c
The fact that the cost of producing hats varies for different buyers implies that Blammo does not have a constant marginal cost curve
d
As a profit-maximizing monopolist, Blammo will produce the quantity where marginal cost equals marginal revenue
e
Being the only producer in the market suggests that Blammo operates in an industry with barriers to entry
Answer
(A) Blammo Industries has a downward sloping demand curve.
Key Concept
Monopoly and Price Discrimination
Explanation
Blammo Industries, as a monopoly, faces a downward sloping demand curve. However, all other statements are true based on the given information.
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