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The following statements have been made about the tabular method used to establish
an optimum price:Which of the following statement(s) regarding Jewel Co’s fixed costs is/are correct?
(1) With the tabular method, there must be a consistent relationship between price
(P) and demand (Q), as well as a close relationship between demand (Q) and
marginal costs (MC).(2) The tabular method is only suitable for companies operating in a monopoly.
A) 1 only
B) 2 only
C) both 1 & 2
D) Neither 1 nor 2CORRECT ANSWER: (B) 2 Only
—————————————————————————————————-Dear tutor!!
I understand why statement 1 is not true but my question is about 2nd statement, 2nd statement stated that TABULAR METHOD is only suitable for monopoly companies but what about ALGEBRAIC APPROACH because the core function of tabular and algebraic approach is same to find optimum selling price and also briefly explain why TABULAR METHOD is suitable for monopoly environment ?Statement 2 is not comparing tabular with algebraic (the same does apply to algebraic as well). The reason both apply in a monopoly environment (and therefore only for certain products) is because we are assuming in both that changes in price with result in changes in demand due only to people buy more in the price is lower (and vice versa) and not because of customers switching to or from other suppliers.
(This question has been amended from an original exam question from 2016 (to fit the current style of section B questions). The original exam question asked you to do calculations specifically using the tabular approach and then asked why the algebraic approach could not be used.)
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