Which of the following is not a characteristic of a monopoly?
a. barriers to entry
b. one seller
c. one buyer
d. a product without close substitutes
Which of the following would be most likely to have monopoly power?
a. an online bookstore
b. a municipal water company
c. a local restaurant
d. a grocery store
Which of the following is an example of a barrier to entry?
a. Tom charges a higher price than his competitors for his golf lessons.
b. Dick charges a lower price than his competitors for his lawn-mowing services.
c. Harry offers free concerts on Sunday afternoons as a form of advertising.
d. Larry obtains a copyright for the new computer game that he invented.
1. The defining characteristic of a natural monopoly is
a. constant marginal cost over the relevant range of output.
b. economies of scale over the relevant range of output.
c. constant returns to scale over the relevant range of output.
d. diseconomies of scale over the relevant range of output.
Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50th game, the firm will always receive
a. less marginal revenue on the 50th game than it received on the 49th game.
b. more average revenue on the 50th game than it received on the 49th game.
c. more total revenue on the 50 games than it received on the first 49 games.
d. Both b and c are correct.
A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301st unit of output is
a. -$120.00.
b. -$75.40.
c. -$0.40.
d. $75.40.
Refer to Figure 15-3. Which of the following statements is correct?
a. Panel C represents the typical demand curve for a perfectly competitive firm, and Panel B represents the typical demand curve for a monopoly.
b. Panel B represents the typical demand curve for a perfectly competitive firm, and Panel A represents the typical demand curve for a monopoly.
c. Panel A represents the typical demand curve for a perfectly competitive firm, and Panel C represents the typical demand curve for a monopoly.
d. Panel C represents the typical demand curve for a perfectly competitive firm, and Panel D represents the typical demand curve for a monopoly.
Refer to Figure 15-7. In order to maximize profits, the monopolist should produce
a. 9 units.
b. 12 units.
c. 15 units.
d. more than 15 units.
Refer to Figure 15-7. In order to maximize profits, the monopolist should charge a price of
a. $9.
b. $12.
c. $20.
d. $23.
Refer to Table 15-4. If the monopolist produces 5 units, what is its average revenue?
a. $100
b. $20
c. $5
d. $4
Refer to Table 15-11. What price should the firm charge to maximize its profit?
a. $4
b. $5
c. $6
d. $7
A monopolist will choose to increase output when
a. market price increases.
b. at all levels of output, marginal cost increases.
c. at the present level of output, marginal revenue exceeds marginal cost.
d. the demand curve shifts to the left.
Suppose a monopolist charges a price of $27 for its product and sells 10 units at that price. At 10 units of production the firm has average fixed cost equal to $10 and average variable cost equal to $12. How much total profit is the firm earning at this price?
a. $5
b. $25
c. $50
d. $140
Refer to Figure 15-22. Based upon the information shown, what is total revenue for Bearclaws, given that it maximizes profits?
a. $900.
b. $980.
c. $490.
d. $1080.
Refer to Figure 15-4. The marginal revenue curve for a monopoly firm is depicted by curve
a. A.
b. B.
c. C.
d. D.
Refer to Figure 15-22. Given that Bearclaws chooses the profit maximizing price and quantity, what profit level will it obtain?
a. $700.
b. $980.
c. $490.
d. $280.
The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly
a. quantity is lower than the socially-optimal quantity.
b. price equals marginal revenue.
c. price is the same as average revenue.
d. earns positive profits.
Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to
a. $250.
b. $500.
c. $750.
d. $1,000.
Refer to Figure 15-14. A benevolent social planner would have the monopoly operate at an output level
a. less than Q0.
b. greater than Q0.
c. equal to Q0.
d. equal to zero.
Refer to Figure 15-14. If the monopoly operates at an output level less than Q0, then an increase in output toward (but not exceeding) Q0 would
a. raise the price and raise total surplus.
b. lower the price and raise total surplus.
c. raise the price and lower total surplus.
d. lower the price and lower total surplus.
Price discrimination requires the firm to
a. separate customers according to their willingnesses to pay.
b. differentiate between different units of its product.
c. engage in arbitrage.
d. use coupons.
Financial aid to college students, quantity discounts, and senior citizen discounts are all examples of
a. consumer surplus.
b. deadweight loss.
c. price discrimination.
d. nonprofit pricing strategies.
Scenario 15-6: The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: die-hard fans and casual fans. For a particular WeR2Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc.
Refer to Scenario 15-6. How much additional profit can the concert promoters earn by charging each customer their willingness to pay relative to charging a flat price of $150 per ticket?
a. $25,000
b. $50,000
c. $75,000
d. $100,000
Refer to Figure 15-17. If this firm were able to perfectly price discriminate, which of the following areas would represent the profit to this perfectly discriminating monopolist?
a. ABE
b. BCFE
c. EFG
d. ACG
Refer to Figure 15-18. If the monopoly firm perfectly price discriminates, then the deadweight loss amounts to
a. $0.
b. $1,000.
c. $2,000.
d. $4,000.
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