Revision

a)Explain two possible price-setting strategies that a monopoly can adopt.

b)Draw a figure illustrating how a natural monopoly may be able to meet demand at a lower cost than two or more firms. Label your figure accurately and provide an explanation.

C)A restaurant owner Betty is trying to decide whether to stay open at lunchtime. She has far fewer customers at lunch than at dinner and the revenue she brings in barely covers her expenses to buy food and pay the staff. What do you recommend her to do? Explain your reasoning.

D)Serengeti is a leader in the design of luxury sunglasses. Figure 1 below shows the demand for sunglasses and the marginal cost (MC) of producing the sunglasses. What is Serengeti's profit-maximising output? What price does Serengeti charge and is it efficient?

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