Question

This statement is true or false explain it completely: If the interest rate is 10%, a monopolist will choose a markup of price over marginal cost of at least 10%.

true or false?

Answer 1

A monopolist will choose a markup of price over marginal cost of at least 10% if the interest rate is 10%.

Step-by-step explanation:

The statement is true.

A monopolist will choose a markup of price over marginal cost of at least 10% if the interest rate is 10%. This is because a monopolist, being the sole seller in the market, has the power to set prices above the marginal cost in order to maximize profits.

1. Let's assume the marginal cost of producing a product is $10.
2. If the interest rate is 10%, the monopolist will charge a price that is at least 10% higher than the marginal cost. In this case, the price would be $11 ($10 + $1 markup).

Therefore, the monopolist will choose a markup of price over marginal cost of at least 10% in this scenario.