ECON 101 - Ch 15 Questions - Assignment Essays

question

The supply curve for the monopolist

answer

does not exist.

question

A monopolist faces a

answer

downward-sloping demand curve.

question

When a monopolist reduces the quantity of output it produces and sells, the

answer

price of its output increases.

question

When the market for a good is a natural monopoly, this results in

answer

dominance by a single producer of the good.

question

A perfectly competitive firm produces where

answer

marginal cost equals price, while a monopolist produces where price exceeds marginal cost.

question

The output effect describes the situation when a monopolist sells more output and, all else equal, total revenue

answer

increases.

question

Which of the following is not an example of a barrier to entry?

answer

An entrepreneur opens a cupcake bakery.

question

A monopolist maximizes profits by

answer

producing an output level where marginal revenue equals marginal cost.

question

If a monopoly market were to be transformed into a competitive market, the result would be that

answer

All of the above would be: market output would increase, the market would be efficient once the market reached the competitive output, the deadweight loss from the monopoly would be eliminated

question

A profit-maximizing monopolist charges a price of $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. Average total cost for 10 units of output is $5. What is the monopolist's profit?

answer

$70

question

A competitive firm

answer

is a price taker, whereas a monopolist is a price maker.

question

Suppose that the DeBeers company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of wholesale diamonds $10,000 per carat?

answer

because the company would sell so few diamonds that it would earn higher profits by selling at a lower price

question

The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference is known as

answer

arbitrage.

question

What do economists call the business practice of selling the same good at difference prices to different customers?

answer

price discrimination

question

A monopoly

answer

can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.

question

If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost, the firm will

answer

earn zero profits.

question

The price effect describes the situation when a monopolist lowers the price of output and, all else equal, total revenue

answer

decreases.

question

What is the shape of the monopolist's marginal revenue curve?

answer

a downward-sloping line that lies below the demand curve

question

Marginal revenue for a monopolist is computed as

answer

change in total revenue per one unit increase in quantity sold.

question

The amount that producers receive for a good minus their costs of producing it equals

answer

producer surplus.

question

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

answer

In both cases, total social welfare is the same.

question

Price discrimination is the business practice of

answer

selling the same good at different prices to different customers.

question

A monopolist's profits with price discrimination will be

answer

higher than if the firm charged just one price because the firm will capture more consumer surplus.

question

Which of the following is an example of public ownership of a monopoly?

answer

U.S. Postal Service

question

Splitting up a monopoly is often justified on the grounds that

answer

competition is inherently efficient.

question

Which of the following statements is not correct?

answer

Part of the deadweight loss associated with monopoly is measured by the monopolist's economic profit.

question

The social cost of a monopoly is equal to its

answer

deadweight loss.

question

A profit-maximizing monopolist will produce the level of output at which

answer

marginal revenue is equal to marginal cost.

question

In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

answer

decision about how much to supply is impossible to separate from the demand curve it faces.

question

The deadweight loss associated with a monopoly occurs because the monopolist

answer

produces an output level less than the socially optimal level.

question

One problem with regulating a monopolist on the basis of cost is that

answer

it does not provide an incentive for the monopolist to reduce its cost.

question

Drug companies are allowed to be monopolists in the drugs they discover in order to

answer

encourage research.

question

Price discrimination

answer

is an attempt by a monopoly to increases its profit by selling the same good to different customers at different prices.

question

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

answer

less market power than it would otherwise have.

question

When a firm operates under conditions of monopoly, its price is

answer

constrained by demand.

question

When a monopolist increases the amount of output that it produces and sells, average revenue

answer

decreases, and marginal revenue decreases.

question

Suppose a monopolist chooses the price and production level that maximizes its profit. From that point, to increase society's economic welfare, output would need to be increased as long as

answer

average revenue exceeds marginal cost.

question

Which of the following is a characteristic of a natural monopoly?

answer

All of the above are correct.

question

Deadweight loss

answer

measures monopoly inefficiency.

question

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

answer

marginal revenue and marginal cost curves.

question

The fundamental source of monopoly power is

answer

barriers to entry.

question

When a single firm can supply a product to an entire market at a lower cost than could two or more firms, the industry is called a

answer

natural monopoly.

question

Which of the following is not a characteristic of a monopoly?

answer

one buyer

question

Which of the following is a characteristic of a monopoly market?

answer

A product with no close substitutes.

question

Because a monopolist must lower its price in order to sell another unit of output,

answer

marginal revenue is less than price.

question

The economic inefficiency of a monopolist can be measured by the

answer

deadweight loss.

question

If government regulation sets the maximum price for a natural monopoly equal to its marginal cost, then the natural monopolist will

answer

earn economic losses.

question

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

answer

a transfer of benefits from the buyer to the seller.

question

When a monopoly increases its output and sales,

answer

the output effect works to increase total revenue, and the price effect works to decrease total revenue.

question

Which of the following would be most likely to have monopoly power?

answer

a local cable TV provider

1 of 50

question

The supply curve for the monopolist

answer

does not exist.

question

A monopolist faces a

answer

downward-sloping demand curve.

question

When a monopolist reduces the quantity of output it produces and sells, the

answer

price of its output increases.

question

When the market for a good is a natural monopoly, this results in

answer

dominance by a single producer of the good.

question

A perfectly competitive firm produces where

answer

marginal cost equals price, while a monopolist produces where price exceeds marginal cost.

question

The output effect describes the situation when a monopolist sells more output and, all else equal, total revenue

answer

increases.

question

Which of the following is not an example of a barrier to entry?

answer

An entrepreneur opens a cupcake bakery.

question

A monopolist maximizes profits by

answer

producing an output level where marginal revenue equals marginal cost.

question

If a monopoly market were to be transformed into a competitive market, the result would be that

answer

All of the above would be: market output would increase, the market would be efficient once the market reached the competitive output, the deadweight loss from the monopoly would be eliminated

question

answer

$70

question

A competitive firm

answer

is a price taker, whereas a monopolist is a price maker.

question

Suppose that the DeBeers company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of wholesale diamonds $10,000 per carat?

answer

because the company would sell so few diamonds that it would earn higher profits by selling at a lower price

question

The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference is known as

answer

arbitrage.

question

What do economists call the business practice of selling the same good at difference prices to different customers?

answer

price discrimination

question

A monopoly

answer

can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.

question

If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost, the firm will

answer

earn zero profits.

question

The price effect describes the situation when a monopolist lowers the price of output and, all else equal, total revenue

answer

decreases.

question

What is the shape of the monopolist's marginal revenue curve?

answer

a downward-sloping line that lies below the demand curve

question

Marginal revenue for a monopolist is computed as

answer

change in total revenue per one unit increase in quantity sold.

question

The amount that producers receive for a good minus their costs of producing it equals

answer

producer surplus.

question

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

answer

In both cases, total social welfare is the same.

question

Price discrimination is the business practice of

answer

selling the same good at different prices to different customers.

question

A monopolist's profits with price discrimination will be

answer

higher than if the firm charged just one price because the firm will capture more consumer surplus.

question

Which of the following is an example of public ownership of a monopoly?

answer

U.S. Postal Service

question

Splitting up a monopoly is often justified on the grounds that

answer

competition is inherently efficient.

question

Which of the following statements is not correct?

answer

Part of the deadweight loss associated with monopoly is measured by the monopolist's economic profit.

question

The social cost of a monopoly is equal to its

answer

deadweight loss.

question

A profit-maximizing monopolist will produce the level of output at which

answer

marginal revenue is equal to marginal cost.

question

In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

answer

decision about how much to supply is impossible to separate from the demand curve it faces.

question

The deadweight loss associated with a monopoly occurs because the monopolist

answer

produces an output level less than the socially optimal level.

question

One problem with regulating a monopolist on the basis of cost is that

answer

it does not provide an incentive for the monopolist to reduce its cost.

question

Drug companies are allowed to be monopolists in the drugs they discover in order to

answer

encourage research.

question

Price discrimination

answer

is an attempt by a monopoly to increases its profit by selling the same good to different customers at different prices.

question

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

answer

less market power than it would otherwise have.

question

When a firm operates under conditions of monopoly, its price is

answer

constrained by demand.

question

When a monopolist increases the amount of output that it produces and sells, average revenue

answer

decreases, and marginal revenue decreases.

question

Suppose a monopolist chooses the price and production level that maximizes its profit. From that point, to increase society's economic welfare, output would need to be increased as long as

answer

average revenue exceeds marginal cost.

question

Which of the following is a characteristic of a natural monopoly?

answer

All of the above are correct.

question

Deadweight loss

answer

measures monopoly inefficiency.

question

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

answer

marginal revenue and marginal cost curves.

question

The fundamental source of monopoly power is

answer

barriers to entry.

question

When a single firm can supply a product to an entire market at a lower cost than could two or more firms, the industry is called a

answer

natural monopoly.

question

Which of the following is not a characteristic of a monopoly?

answer

one buyer

question

Which of the following is a characteristic of a monopoly market?

answer

A product with no close substitutes.

question

Because a monopolist must lower its price in order to sell another unit of output,

answer

marginal revenue is less than price.

question

The economic inefficiency of a monopolist can be measured by the

answer

deadweight loss.

question

If government regulation sets the maximum price for a natural monopoly equal to its marginal cost, then the natural monopolist will

answer

earn economic losses.

question

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

answer

a transfer of benefits from the buyer to the seller.

question

When a monopoly increases its output and sales,

answer

the output effect works to increase total revenue, and the price effect works to decrease total revenue.

question

Which of the following would be most likely to have monopoly power?

answer

a local cable TV provider

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ECON 101 – Ch 15 Questions

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