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Chapter 9 Monopoly
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Identify a distinguishing feature of monopoly.
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There are no close substitutes for a monopolist's product.
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A natural monopoly forms when a firm has
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A downward-sloping long-run average cost curve.
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The demand curve a monopolist uses in making an output decision is
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The same as the market demand curve.
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Which of the following is true of marginal revenue earned by a non-price-discriminating monopolist that charges a single price?
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Marginal revenue earned by a monopolist is less than the price of its product.
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Given the figure below, a nondiscriminating, profit-maximizing monopolist will earn a profit of ______ per unit of output.
a. $10
b. $5
c. $4
d. $0
e. $15
a. $10
b. $5
c. $4
d. $0
e. $15
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c. $4
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Which of the following does a monopoly control that a perfectly competitive firm does not control?
a. Total production
b. Production tech
c. Price
d. Input usage
e. Plant size
a. Total production
b. Production tech
c. Price
d. Input usage
e. Plant size
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c. Price
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The figure below shows the cost and revenue curves for a nondiscriminating monopolist. The profit-maximizing output and price for a monopolist are
a. 90 units and $18
b. 1,500 units and $24
c. 1,700 units and $22
d. 1,100 units and $28
e. 1,500 units and $22
a. 90 units and $18
b. 1,500 units and $24
c. 1,700 units and $22
d. 1,100 units and $28
e. 1,500 units and $22
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d. 1,100 units and $28
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The table below shows the demand schedule faced by a monopolist and the total cost incurred by it in producing each output level. The profit-maximizing price for the monopolist is
P Q TC
16 0 5.00
15 1 7.00
14 2 8.80
13 3 10.40
12 4 12.20
11 5 14.20
10 6 16.40
9 7 18.80
8 8 21.40
7 9 24.20
a. $14
b. $11
c. $10
d. $9
e. $8
P Q TC
16 0 5.00
15 1 7.00
14 2 8.80
13 3 10.40
12 4 12.20
11 5 14.20
10 6 16.40
9 7 18.80
8 8 21.40
7 9 24.20
a. $14
b. $11
c. $10
d. $9
e. $8
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d. $9
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The figure below shows the total cost and total revenue curves for a monopolist. The profit-maximizing output for the monopolist is
a. 1 unit
b. 2 units
c. 3 units
d. 4 units
e. 5 units
a. 1 unit
b. 2 units
c. 3 units
d. 4 units
e. 5 units
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c. 3 units
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The figure below shows the cost and revenue curves for a monopolist. Assume that the monopolist does not shut down production in the short run. The profit-maximizing price and output for this non-price-discriminating monopolist are
a. $4 and 7 units
b. $3.50 and 10 units
c. $2 and 7 units
d. $1 and 7 units
e. $1 and 10 units
a. $4 and 7 units
b. $3.50 and 10 units
c. $2 and 7 units
d. $1 and 7 units
e. $1 and 10 units
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$4 and 7 units
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The practice of charging different prices to different consumers for the same product is called
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Price discrimination
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A price-discriminating monopolist divides its customers into two segments based on price elasticity of demand. If it sells its products for a price of $42 in the market segment where demand is relatively less price elastic, the price in the market segment where demand is more price elastic will be
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Less than $42
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Ch. 10 Monopolistic Competition and Oligopoly
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Monopolistically competitive industries consist of
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Many firms, each selling a slightly different product.
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Figure 10.1 shows the demand, marginal revenue, and cost curves for a monopolistic competitor. The price that the monopolistic competitor will charge at the profit-maximizing level of output is
a. $2
b. $4
c. $8
d. $9
e. $10
a. $2
b. $4
c. $8
d. $9
e. $10
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e. $10
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Table 10.1 shows the output, price, and total cost for a monopolistic competitor. At the profit-maximizing output, the firm earns
Q P TC
1 $27 $10
2 24 17
3 21 32
4 18 47
5 15 67
Q P TC
1 $27 $10
2 24 17
3 21 32
4 18 47
5 15 67
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An economic profit of $31
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A profit-maximizing firm in monopolistic competition should shut down in the short run if
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Price is less than average variable cost.
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An oligopoly is characterized by
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A few firms, which have control over market price.
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In an oligopoly, the demand curve facing an individual firm depends upon the
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Behavior of competing firms.
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Interdependent decision making on price, quality, or advertising is a characteristic of
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Oligopolies
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A cartel is
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A group of oligopolistic firms that engage in collusion.
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During certain periods in the past few decades if one of the three major breakfast cereal producers in the U.S. announced a price increase, the other two announced a similar price increase. This implies that the market for breakfast cereals is a good example of
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The price-leadership model of oligopoly.
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The principal advantage of the game theory approach is that it allows to
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Better understand decision making when one person's choices affect another person's choices.
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