question
Refer to Table 15-1. At what price will the monopolist maximize his profit?
answer
$18
question
Refer to Figure 15-1. The shape of the average total cost curve in the figure suggests an opportunity for a profit-maximizing monopolist to take advantage of
answer
economies of scale.
question
Monopolies are socially inefficient because the price they charge is
answer
above marginal cost.
question
Granting a pharmaceutical company a patent for a new medicine will lead to
answer
a product that is priced higher than it would be without the exclusive rights.
question
Which of the following can defeat the profit-maximizing strategy of price discrimination?
answer
Arbitrage
question
Price discrimination is a rational strategy for a profit-maximizing monopolist when
answer
there is no opportunity for arbitrage across market segments.
question
Refer to Figure 15-6. What is the monopoly price and quantity?
answer
Price = X; quantity = J
question
Refer to Scenario 15-1. At Q = 500, the firm's marginal cost is
answer
$40.
question
Which of the following can eliminate the inefficiency inherent in monopoly pricing?
answer
Price discrimination
question
A natural monopoly occurs when
answer
there are economies of scale over the relevant range of output.
question
Refer to Figure 15-2. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to
answer
increase if the output is between Q3 and Q4.
question
When an industry is a natural monopoly,
answer
a larger number of firms will lead to a higher average total cost.
question
A government-created monopoly arises when
answer
the government gives a firm the exclusive right to sell some good or service.
question
A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it
answer
can prevent children from buying the lower-priced tickets and selling them to adults.
question
Refer to Figure 15-2. The demand curve for a monopoly firm is depicted by curve
answer
A.
question
For a firm to price discriminate,
answer
it must have some market power.
question
The deadweight loss associated with a monopoly occurs because the monopolist
answer
produces an output level less than the socially optimal level.
question
When a monopolist increases the amount of output that it produces and sells, average revenue
answer
decreases, and marginal revenue decreases.
question
A monopolist can sell 300 units of output for $50 per unit. Alternatively, it can sell 301 units of output for $49.60 per unit. The marginal revenue of the 301st unit of output is
answer
-$70.40.
question
Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the marginal revenue from selling the 5th tie?
answer
$120
question
Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the average revenue when 7 ties are sold?
answer
$130
question
Which of the following statements is not correct?
answer
Antitrust laws automatically prevent mergers between companies that produce similar products.
question
A firm cannot price discriminate if
answer
it operates in a competitive market.
question
The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?
answer
A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.
question
Which of the following governmental actions would eliminate some or all of the inefficiency that results from monopoly pricing?
answer
Policymakers can regulate prices that the monopoly charges.
question
Refer to Figure 15-6. What is the area of deadweight loss?
answer
The triangle 1/2[(X − Z) × (K − J)]
question
Which of the following is not an example of price discrimination?
answer
NOT - A local supermarket chain offers a "buy three get one free" deal.
question
Which of the following is a necessary characteristic of a monopoly?
answer
The firm is the sole seller of its product.
question
Refer to Figure 15-3. A profit-maximizing monopoly will produce an output level of
answer
Q3
question
The law passed in 1914 that strengthened the government's powers and authorized private lawsuits was
answer
the Clayton Antitrust Act.
question
Refer to Figure 15-4. What price will the monopolist charge in order to maximize profit?
answer
B
question
Which of the following would be most likely to have monopoly power?
answer
A local cable TV provider
question
In order for antitrust laws to raise social welfare, the government must
answer
be able to determine which mergers are desirable and which are not.
question
If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm
answer
sole ownership of the right to sell the drug for a limited number of years.
question
Which of the following statements is true?
answer
When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.
question
Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold?
answer
$450
question
Scenario 15-1
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44.
Refer to Scenario 15-1. At Q = 500, the firm's profit is
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44.
Refer to Scenario 15-1. At Q = 500, the firm's profit is
answer
$18,000.
question
If a monopolist is able to perfectly price discriminate,
answer
consumer surplus and deadweight losses are transformed into monopoly profits.
question
Refer to Figure 15-2. A profit-maximizing monopoly's total revenue is equal to
answer
P5 × Q3.
question
Refer to Table 15-2. The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell?
answer
900
question
If a profit-maximizing monopolist faces a downward-sloping market demand curve, its
answer
marginal revenue is less than the price of the product.
question
Refer to Figure 15-4. What area measures the monopolist's profit?
answer
(B − Y) × O
question
Which of the following statements is not correct?
answer
The government may break up a natural monopoly to lower the price charged to customers.
question
Which of the following is not an example of price discrimination by a firm?
answer
A natural gas company charging all customers a higher rate in the winter than in summer
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