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Microeconomics Level 2 Module 3 Sandeep Kapur

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1). The DeBeers company is a profit-maximizing monopolist that exercises monopoly power in the distribution of diamonds. If the company earns positive economic profits this year, the price of diamonds will: • Exceed the marginal cost of diamonds but eual to the average total cost of diamonds. • Exceed both the marginal cost and the average total cost of diamonds. • Be eual to the marginal cost of diamonds. • Be eual to the average total cost of diamonds. 2). Using 100 workers and 10 machines, a firm can produce 10,000 units of output; using 250 workers and 25 machines, the firm produces 21,000 units of output. These facts are best explained by: • Economies of scope • Diseconomies of scale • Diminishing marginal productivity •

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